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Tuesday, January 29, 2013

Dreamliner probe widens after excess battery voltage ruled out


(Reuters) - U.S. safety investigators on Sunday ruled out excess voltage as the cause of a battery fire this month on a Boeing Co (BA.N) 787 Dreamliner jet operated by Japan Airlines Co (JAL) (9201.T) and said they were expanding the probe to look at the battery's charger and the jet's auxiliary power unit.
Last week, governments across the world grounded the Dreamliner while Boeing halted deliveries after a problem with a lithium-ion battery on a second 787 plane, flown by All Nippon Airways Co (ANA) (9202.T), forced the aircraft to make an emergency landing in western Japan.
A growing number of investigators and Boeing executives are working around the clock to determine what caused the two incidents which the U.S. Federal Aviation Administration says released flammable chemicals and could have sparked a fire in the plane's electrical compartment.
There are still no clear answers about the root cause of the battery failures, but the U.S. National Transportation Safety Board's statement eliminated one possible answer that had been raised by Japanese investigators.
It also underscored the complexity of investigating a battery system that includes manufacturers across the world, and may point to a design problem with the battery that could take longer to fix than swapping out a faulty batch of batteries.
"Examination of the flight recorder data from the JAL B-787 airplane indicates that the APU (auxiliary power unit) battery did not exceed its designed voltage of 32 volts," the NTSB said in a statement issued early Sunday.
On Friday, a Japanese safety official had told reporters that excessive electricity may have overheated the battery in the ANA-owned Dreamliner that was forced to make the emergency landing at Japan's Takamatsu airport last week.
"The NTSB wanted to set the record straight," said one source familiar with the investigation who was not authorized to speak publicly.
U.S. investigators have already examined the lithium-ion battery that powered the APU, where the battery fire started in the JAL plane, as well as several other components removed from the airplane, including wire bundles and battery management circuit boards, the NTSB statement said.
On Tuesday, investigators will convene in Tucson, Arizona to test and examine the charger for the battery, and download non-volatile memory from the APU controller, with similar tests planned at the Phoenix facility where the APUs are built. Other components have been sent for download or examination to Boeing's Seattle facility and manufacturer facilities in Japan.
Securaplane Technologies Inc, a unit of Britain's Meggitt Plc (MGGT.L) that makes the charger, said it will fully support the U.S. investigation.
Officials with United Technologies Corp (UTX.N), which builds the plane's auxiliary power unit and is the main supplier of electrical systems on the 787, said they would also cooperate with the investigation.
The NTSB's decision to travel to Securaplane's facility sparked fresh questions about the safety of the lithium-ion batteries that remain at the heart of the investigation.
While the 787 is the most aggressive user of lithium-ion battery technology in commercial aviation, the industry at large is testing it, and the FAA has approved its use in several different planes, each governed by "special conditions."
"Lithium-ion batteries are significantly more susceptible to internal failures that can result in self-sustaining increases in temperature and pressure," the FAA said in 2006, when it allowed Airbus to use lithium batteries for the emerging lighting system on its A380.
Securaplane, which first began working on the charger in 2004, suffered millions of dollars of damages in November 2006 after a lithium-ion battery used in testing exploded and sparked a fire that burned an administrative building to the ground.
Boeing spokesman Marc Birtel said an investigation into the 2006 fire was later determined to have been caused by an improper test set-up, not the battery design. He declined comment on the current 787 investigations.
After the fire, a former Securaplane employee named Michael Leon sued the company, alleging that he was fired for raising security concerns about charger and discrepancies between their assembly documents and the finished chargers.
Leon's suit was later dismissed.
The U.S. Federal Aviation Administration (FAA) on Sunday said it had investigated Leon's safety complaints in 2008 and 2009 but concluded his allegations focused on prototypes that were not ultimately used in the new lightweight airliner.
FAA spokeswoman Laura Brown said the reviews also found that Securaplane's production of a particular printed circuit board complied with FAA requirements.
Japan's GS Yuasa Corp (6674.T) makes lithium-ion batteries for the Dreamliner, while France's Thales (TCFP.PA) produces the control systems for the battery. Thales has declined comment.
In its statement, the NTSB said French authorities were also participating in the investigation. No comment was immediately available from the French safety agency.
JAPANESE INVESTIGATION GEARING UP
Japan Transport Safety Board said it was aware of the NTSB report and would consider the U.S. statement in its probe.
The NTSB said the Japanese agency was participating in its investigation of the Boston incident, while NTSB officials were helping the agency with its investigation of the emergency landing in Japan. Both investigations were ongoing.
"There's nothing more I can add at this point as we still haven't started our investigation into the battery here," JTSB inspector Hideyo Kosugi told Reuters. "The NTSB's investigation started earlier. We still haven't taken X-rays or CT-scans of the battery."
Kosugi said both the battery and the surrounding systems were being stored in Tokyo's Haneda Airport until authorities decided where to conduct the Japanese investigation.
Boeing said on Friday it would continue building the carbon-composite 787, but put deliveries on hold until the U.S. Federal Aviation Administration approves and implements a plan to ensure the safety of potentially flammable lithium-ion batteries.
In Washington, U.S. Transportation Secretary Ray LaHood said the 787, which has a list price of $207 million, would not fly until regulators were "1,000 percent sure" it was safe.
Japan is the biggest market so far for the 787, with ANA and JAL operating 24 of the 290-seat wide-bodied planes. Boeing has orders for almost 850 of the planes, which have the most complex electrical systems of any planes on the market.
It remains unclear if the investigations will cause other airlines -- and military aircraft builder -- to rethink their plans to use lithium-ion batteries, which are lighter and more powerful than conventional batteries.
Airbus plans to use similar batteries on its rival to the 787, the A350, which is due to make its maiden test flight in the middle of this year.
European executives said last week they would study the findings of the U.S. investigation but said their decision to move more slowly than Boeing towards electric systems, and spread the load over twice as many batteries, would reduce the risk.
Aviation Week quoted Airbus programs chief Tom Williams as saying "failure management" was key and that any escaping gases from the A350 batteries would be protected by titanium as they are expelled from the aircraft. The company has not said if it would attempt to suppress a lithium fire or focus on containing a lithium blaze, as Boeing has done.
Williams told Aviation Week that switching from lithium back to nickel cadmium would require significant engineering work with both space and weight penalties. Airbus was not immediately available to comment on the article.
Brazilian plane maker Embraer SA (EMBR3.SA) declined comment when asked if it planned to rethink its use of lithium-ion batteries on its military transport plane and new business jets.
The Embraer programs use a battery made in the United States, unlike the Japanese one on the 787.
Lockheed Martin Corp (LMT.N), maker of the F-35 Joint Strike Fighter, has said it does not see a problem since the lithium-ion batteries on the military plane are made by France's Saft Groupe (S1A.PA), not Yuasa.
(Corrects month when fire took place in first paragraph)
(Additional reporting by Antoni Slodkowski, James Topham, Kentaro Sugiyama, Yoshiyuki Osada and Yuka Obayashi in Japan; Peter Henderson in Los Angeles, Tim Hepher in London and Alwyn Scott in Seattle; Editing by Daniel Magnowski, Maureen Bavdek and Marguerita Choy)

Boeing's Dreamliner delay hits Hainan Airlines


(Reuters) - Hainan Airlines (600221.SS), China's fourth-largest carrier, said Boeing's (BA.N) failure to deliver its Dreamliner aircraft had forced the airline to delay some new routes, including between Beijing and New York.
"Frankly, it's a little disappointing the aircraft has been delayed so many times," Chen Feng, chairman of HNA Group, the airline's parent company, said on Wednesday. "We still think it's a good aircraft, but this has had some effect on our planning."
Hainan Airline has 10 Boeing 787-8 Dreamliners on order. Each aircraft has a list price of $206.8 million, according to Boeing's website.
The U.S. Federal Aviation Administration grounded the 787 temporarily after a second incident involving a lithium ion battery caused an emergency landing.
Under Chen, Hainan Airlines has expanded rapidly and added brands such as Hong Kong Airlines to its portfolio. It also bought 48 percent of niche French carrier Aigle Azur in October.
In an interview at the World Economic Forum in Davos, Chen said Hainan Airlines was looking to join an airline alliance, but was unable to join one as all three major groupings - Star, Oneworld and Skyteam - already have a Chinese partner.
Air China (601111.SS) is a member of Star, while China Eastern 601115.SS and China Southern (600029.SS) are both members of Skyteam. Cathay Pacific (0293.HK), Hong Kong's dominant carrier, is a Oneworld member.
"We'll continue looking for an opportunity to work with airlines either bilaterally or through an alliance, but there are issues," Chen said.
(Reporting by Kelvin Soh; Editing by David Holmes)

Southeast Asian airlines risk margins with expansion spree: DVB Bank


(Reuters) - Low-cost Southeast Asian airlines risk jeopardizing their margins by buying too many planes too quickly, an influential aviation banker said.
Across the region, discount carriers have placed orders over the past two years for at least $50 billion worth of aircraft, taking new Boeing and Airbus jets to serve dozens of fresh routes and replace their fleets. They are betting the region's expanding middle class will demand more and more frequent air travel for years to come.
Many of those carriers are making the wrong decisions by trying to grow market share without anticipating pressure on profit margins, DVB Bank SE's (DVBG.F) Bertrand Grabowski, who heads the German bank's aviation and land transport finance divisions, told Reuters in an interview.
"I think individually for most of these airlines, the peak is over and they need to be more frugal in terms of capacity growth, otherwise they are going to kill themselves in terms of profitability," said Grabowski, who has worked in aviation banking for around three decades.
A glut of new capacity will force airlines to ply some less profitable routes, their margins.
Budget carriers including Air Asia Bhd (AIRA.KL), privately-held Lion Air, Cebu Air Inc (CEB.PS) and Tiger Airways Holdings Ltd (TAHL.SI) have 700-plus new planes on order, he said.
"Our opinion at DVB is that those book orders are far too big," said London-based Grabowski, who leads the bank in deals such as financing several aircraft for Lion Air.
Airbus (EAD.PA) and Boeing Co (BA.N) have both issued brisk demand forecasts for the next 20 years, predicting 4 trillion dollars of aircraft deliveries, mainly on the back of emerging markets led by Asia. The bulk of that money will come from banks such as DVB, or leasing companies.
"Everybody thinks that not only the market will grow, which is a legitimate assumption, but 'my share will also grow,'" Grabowski said. "And 'by the way, if the guy next door grows, I need to make sure that I have the capacity to fight my market share,'" he said.
AirAsia and Cebu were unable to provide any immediate comment for this report, while Lion Air and Tiger could not be reached for comment.
Lion Air has an advantage over rivals because it already controls about half of Indonesia's domestic market, which has much further to expand, Grabowski said.
Airlines and their suppliers alike have staked much on air travel in a region where passenger growth outpaces that of developed nations. The world's two largest planemakers believe that about two thirds of new aircraft will be sold in the Asia-Pacific region over the next two decades.
TOO MANY ORDERS
Grabowski, speaking ahead of a key aircraft finance industry gathering in Dublin this week, thinks many of those new orders will prove to be too optimistic.
"I would not be shocked if from 700 for those carriers, the orders will go down to 400, 450. There could be cancellations, there could be deferrals and this will happen, almost certainly," he said.
An analyst at the Centre for Asia Pacific Aviation said since the deliveries for aircraft were spread across many years, markets would be able to absorb the new capacity.
"In some markets, yes, the competition will be intense and that could have an impact on yields, leading to consolidation, likely impacting the smaller players rather than the big powerful groups," said Brendan Sobie, chief analyst at the industry consultancy.
"But generally given the economic conditions in the region the capacity can be absorbed and the outlook is bright for LCCs (low cost carriers)," he said.
Airlines have the flexibility to re-schedule deliveries, or enter into sale-and-lease back of their fleet. They generally pay for aircraft on delivery, not when they order them.
In February 2012, Lion Air confirmed a provisional record order for 230 Boeing aircraft taking the carrier's order book to more than 400 planes. Delivery of the planes will be in 2017-25.
Tony Fernandes, Group Chief Executive of AirAsia, believes Southeast Asia is underserved, and has previously said his firm would defend its margins.
As of November, AirAsia Group had a total fleet of 112 A320 jets and expected 266 more aircraft to be delivered up to 2026. Last December, it confirmed a $9.4 billion order for 100 more Airbus jets, making it the European planemaker's largest airline customer by number of planes ordered.
(Editing by Daniel Magnowski)

Exclusive: Japan eased safety standards ahead of Boeing 787 rollout


(Reuters) - Japan's government stepped in to give Boeing Co's now-grounded 787 Dreamliner and its made-in-Japan technology a boost in 2008 by easing safety regulations, fast-tracking the rollout of the groundbreaking jet for Japan's biggest airlines, according to records and participants in the process.
The concessions by an advisory panel to Japan's transport ministry reflected pressure from All Nippon Airways (ANA) and Japan Airlines (JAL) and a push to support Japanese firms that supply 35 percent of the 787 from the carbon-fiber in its wings to sophisticated electrical systems and batteries used to save fuel, people involved in the deliberations told Reuters.
"I believe the request for the changes came initially from the airlines. Ultimately, it was a discussion of measures to lower operating costs for the airlines," said Masatoshi Harigae, head of aviation at Japan's Aerospace Exploration Agency, one of the outside advisers who urged the eased regulatory standards.
There is no suggestion that easing regulatory standards contributed to the problems facing the Dreamliner, idled around the world after a string of malfunctions ranging from fuel leaks to battery meltdowns. There is also no evidence to suggest that continuing the mandate for more frequent manual inspections for new aircraft, including the Boeing 787, before 2008 would have helped catch signs of trouble earlier.
The looser regulations did not specifically address the risk of the Dreamliner's powerful batteries catching fire, the risk that safety investigators have zeroed in on in recent weeks.
But the steps taken by Japan's Civil Aviation Bureau in 2008 underscore how the deep commercial ties between Boeing and its Japanese suppliers and the backing of ANA and JAL helped build support for an easing of certification standards, based on a review of meeting records by the advisory panel released by the Ministry of Land, Infrastructure and Transport and comments from three of the seven experts who participated.
ANA and JAL declined to comment, deferring questions on regulatory standards to aviation officials and the ministry. Boeing in Tokyo said it couldn't immediately comment on the rule changes.
"We have not brought down our standards in comparison to other countries. This was a pragmatic revision," Tatsuyuki Shimazu, Chief Air Worthiness Engineer at the Civil Aviation Bureau, said.
ONGOING PROBE
Earlier this month, ANA was forced to make an emergency landing on a 787 domestic flight after a battery overheated and partially melted, triggering smoke alarms in the cockpit. The probe into that incident may take weeks or months as investigators still lack basic data to understand what went wrong, people involved have said.
In the meantime, the indefinite grounding of the Dreamliner has raised costs for both ANA and JAL and threatened to push back plans both carriers had for growth and new routes based on the new aircraft, analysts have said.
Boeing has yet to say whether it will compensate carriers for flight cancellations and higher operating costs. "We have been talking with our customers since (the 787 was grounded), but the details are confidential," said Rob Henderson, a Boeing spokesman in Tokyo.
After three meetings by a panel of industry and policy experts that concluded in March 2008, Japan's transport ministry said it would adopt 40 proposals to streamline regulations surrounding new aircraft. At the time, the ministry said the easier regulatory standards were designed in part to "quickly realize the benefits from the introduction of the 787."
ANA, the Dreamliner's biggest customer, and JAL committed to buy the first 787 in 2004, helping Boeing kick-start orders for the futuristic plane. Both subsequently increased their orders, with ANA planning to eventually fly 66 Dreamliners.
"At the time there was a lot of confidence in the aircraft. It was a discussion of measures to lower operating costs for the airlines," said Harigae.
Japan's government agencies often convene blue-ribbon panels of outside experts to review regulatory policy changes, as the transport ministry did for aircraft safety rules in 2007.
QUICKER TURNAROUNDS
Changes endorsed by the aviation group, including 40 revised safety guidelines, were presented as an effort to bring Japan into line with the framework of regulations in other markets, including the United States. At least five recommendations in the advisory report benefited the 787. Four mentioned support for the Dreamliner directly.
Three of the rule changes dealt with abbreviated testing and approval of pilots who had been cleared to fly the Boeing 777 and were preparing to switch to the 787. "It (787) is highly innovative and its safety is also advanced, but it's also very similar in design to the 777," said Kinya Fujiishi, an aviation journalist who sat on the panel. "This is why we thought it would be fine to revise the rule."
Another approved rule change exempted Boeing's new jet from the need for detailed inspections by ground crew after each landing that would have meant higher costs - and longer delays - for the airlines with each flight. Participants said the panel concluded such checks were not needed because of the Dreamliner's sophisticated on-board diagnostic system.
JAL said it still performs checks between 787 flights because it is still required to do so after international routes. ANA said it checks domestic 777 and 787 flights although rules no longer mandate them to perform these.
At the same time, the revised rules opened up potentially lucrative trans-Pacific destinations to ANA and JAL with the Dreamliner sooner than previous standards would have allowed. Changes shortened the time needed to win approval - known as Extended-range Twin-engine Operational Performance Standards (ETOPS) - to fly two-engined jets on routes distant from emergency airfields.
But production and design snags meant ANA, even so, had to wait until 2011 for its first Dreamliner.
DEEP TIES
In 2009, a bilateral agreement between Japan and the United States provided further support for the Dreamliner to enter service in Asia. That pact allowed aviation officials in Tokyo to certify the airworthiness of the U.S.-built jets based on testing mostly approved by the Federal Aviation Authority (FAA).
In 2007, the FAA cleared Boeing's use of a potentially flammable battery in the Dreamliner because Boeing's design was expected to contain any potential fire and divert smoke and fumes away from the passenger cabin.
Japan's support for the Dreamliner reflects how closely integrated the nation's aerospace industry has become in Boeing's supply chain, experts say. "If the 787 prevails all over the world it's good for Japanese industry, so the government wants to support it," said Hajime Tozaki, an aviation policy specialist and professor at Tokyo's Waseda University, who was not part of the 2008 review.
Japanese companies led by Mitsubishi Heavy Industries Ltd maker of the wartime Zero fighter, build a third of the Dreamliner including its wings. With each succeeding Boeing model, Japanese suppliers have deepened their involvement from supplying parts for the 747 jumbo jet to becoming full-fledged, risk-sharing partners with the U.S. aircraft builder.
The stake of Japanese suppliers rose from less than a fifth for the 767 to a quarter for the 777 and 35 percent for the 787. As many as 22,000 aerospace jobs at 65 firms in Japan are pegged to Boeing's fortunes, Boeing estimates.
After years of trying, Europe's Airbus has failed to drive a wedge into Japan's ties to Boeing, which in the past decade has won more than 80 percent of Japan's aircraft orders.
POTENTIAL DAMAGE
For now, Japan is sticking by Boeing with some even calling for a more conspicuous government support for the 787.
"I didn't feel there was enough (government) effort to promote the 787," said Hiroyasu Hagio, a former JAL pilot who represented flight crews in the 2008 review as head of the Japan Aircraft Pilot Association. He added: "In other countries it's normal for countries to aggressively get involved in sales."
The two big Japanese carriers remain committed to putting the 787 at the core of their fleet planning and say there has been no change to their order plans.
But there are signs the Dreamliner's problems have strained ties between Japan and Boeing. Last week, U.S. diplomats met Japanese officials in Tokyo to discuss the political and economic fallout from the Dreamliner's grounding.
"If Boeing intentionally and politically puts the losses on to Japanese companies, the damage for Japan will be huge," said Isao Iijima, a political adviser to Prime Minister Shinzo Abe.
(Additional reporting by Maki Shiraki, James Topham, Antoni Slodkowski and Yumi Muranaka; Editing by Kevin Krolicki and Ian Geoghegan)

Analysis: Bombardier, Embraer battle for bronze in commercial jet market


(Reuters) - Big wins for both Bombardier Inc (BBDb.TO) and Embraer SA (EMBR3.SA) have heated up the battle in the regional-jet market, as North America's largest airlines dole out big fleet renewal orders after a long hiatus.
In a market that is a virtual duopoly, the short-hop, narrow-body jets manufactured by Brazil's Embraer have outsold those from Canada's Bombardier for at least eight years.
But signs of newfound sales aggression from Bombardier, and its desire not to lose ground in its traditional North American stronghold, could mean a fierce campaign for orders expected from U.S. No. 1 carrier UnitedAirlines (UAL.N) and smaller rival US Airways (LCC.N).
"That will be the next big horse race out there," said Brian Foley, who runs his own aviation research firm in Sparta, New Jersey. "I'm sure both Embraer and Bombardier are in some preliminary discussions, and we could see that being the next news item, this year even."
Bombardier was off to a strong start in December with an order worth up to $3.29 billion from Delta Air Lines (DAL.N). But Embraer's win on Thursday of a deal worth up to $4 billion to supply the regional network of AMR Corp's (AAMRQ.PK) American Airlines puts it neck-and-neck in the U.S. contest.
With production levels hinging on new orders, fresh momentum for Bombardier could unseat Embraer as the world's No. 3 supplier to commercial airlines, after Boeing Co (BA.N) and Airbus (EAD.PA).
Embraer's head of commercial aviation, Paulo Cesar de Souza e Silva, said on Thursday the surge in demand by U.S. carriers was just beginning. American's regional-jet needs were not satisfied by the Embraer order.
Aerospace analyst Scott Hamilton of Leeham Co said Bombardier stood a good chance in the next round of orders from American for planes that ferry up to 120 passengers from smaller airports to bigger hubs. "This is not an exclusive deal for Embraer. American Eagle has such a large mixed fleet of Embraers and Bombardiers that I still view this as an opportunity for Bombardier."
The fight for orders will be ferocious, as both planemakers are hungry to expand their skinny regional-jet order books, hurt by years of slow growth and airlines' shift to bigger planes.
PENT-UP U.S. DEMAND
The biggest U.S. airlines have been the major holdouts against the trend to larger regional jets. Labor agreements long defined regional fleets as planes under 50 seats, a clause that restricted carriers to smaller airplanes as mainline pilots resisted the outsourcing of more flying to cheaper partner operations.
The loosening of those clauses in new labor contracts because of airline bankruptcies and mergers is expected to prompt a string of deals to overhaul the U.S. regional jet fleet. There could be demand for between 250 and 400 planes in the next 18 months, Embraer's Silva says.
Industry sources say Bombardier has started linking its sales pitch to an offer to help airlines re-sell their older Bombardier planes as they upgrade their fleets, a newly aggressive approach that they say was a key factor in winning the Delta order.
Bombardier would not reveal details of the deal, but a spokesman said it has helped other airlines find "new homes" for CRJs, or Canadair Regional Jets, in such growth markets as Russia and Africa.
The stronger sales pitch would come just as the Montreal-based company needs cash to fund expensive development programs, particularly for its $3.4 billion, 110- to 149-seater C-Series. Bombardier sees its biggest jet yet as central to future growth.
REGIONAL-JET ARMS RACE
As aggressive as the current bidding may be, Embraer and Bombardier may soon look back fondly on their two-way contests.
Up-and-coming rivals include Japan's Mitsubishi Heavy Industries (7011.T), Russia's Sukhoi (UNAC.MM) and even China's COMAC, threatening to drive down prices in coming years.
Bombardier virtually invented the regional-jet segment when its CRJ100 entered service in 1992. Embraer broke into the space with its ERJ145 in 1996.
In 2001, Bombardier began offering stretched versions of its regional jets with 70 to 90 seats. Embraer quickly raised the stakes with a new design, including expanded headroom and cargo space, for its E-Jet family seating 70 to 120 passengers.
E-Jets have outsold CRJs since they were introduced eight years ago. By 2012, Embraer controlled just over 50 percent of the regional aircraft market, including turboprop planes, according to the Teal Group aerospace consultancy.
Bombardier's market share fell below 30 percent, from 72 percent in 2003.
Embraer's 2011 announcement of a planned overhaul of its E-Jets will put more pressure on Bombardier, eroding the efficiency advantages it touts for the CRJ, which is unlikely to see another engine upgrade, according to analysts.
DOGFIGHT FOR A SEATING CATEGORY
Airlines are often hesitant to switch fleets from one supplier to another, since additional training and maintenance costs can outweigh savings on the purchase.
Delta and US Airways and their regional flying partners operate more Bombardier CRJs. American and United and their partners use more Embraer jets.
Philippe Poutissou, vice-president of commercial aircraft at Bombardier, cautions against looking at blanket figures and says a better measure of who's on top is to consider where the demand is.
"If you look at the U.S. market overall at the 70- to 90-seat category, which is where the opportunity lies, the CRJ has outsold the E-Jet two to one, if you are specifically looking at the CRJ700 and CRJ900," he said in a recent interview.
But for Richard Aboulafia, a senior analyst with the Fairfax, Virginia-based Teal Group, Bombardier has a narrow window for selling more ambitiously before the re-engined E-Jet and Mitsubishi's new jet take off.
"They need to work hard to keep the Delta order from being a dead-cat bounce," Aboulafia said.
(This story was fixed to change "Canadian's" to "Canada's" in second paragraph)
(Editing by Janet Guttsman and Prudence Crowther)

Exclusive: US Air, AMR deal could come in next two weeks - sources


(Reuters) - US Airways Group Inc and AmericanAirlines parent AMR Corp are in the final stages of negotiating a merger, with the final price and management structure still to be resolved, four people familiar with the matter said.
The two airlines, as well as AMR's creditors and its bondholders, have focused their efforts in recent weeks on reaching a merger agreement, and a deal could come in the next two weeks, the people said on Friday.
AMR's board, which has not made a final decision and still considers its own restructuring plan as a viable one to revive the airline, plans to meet on January 28 and January 29 to discuss the latest developments in the negotiations, the people said.
AMR filed for bankruptcy in November 2011 citing high labor costs. A combination with US Airways would create the world's largest airline and help the two carriers better compete with larger rivals United Continental Holdings Inc and Delta Air Lines Inc.
Negotiations are continuing and could still fall apart, but progress has been made toward getting a deal done, the people said. An alternative plan for AMR to exit bankruptcy as an independent company appears a less likely path, they added.
All the people asked not to be named because the matter is not public. US Airways declined to comment. An AMR spokesman said the carrier cannot comment on the status of the discussions.
Representatives for AMR's unsecured creditors committee and its bondholders group were not immediately reachable for comment.
The airlines have a potential structure for the board of a merged company, which would consist of members from the existing boards of US Airways and AMR, and those to be designated by AMR creditors, the people said.
Negotiations have now largely come down to how the equity of the combined company would be split between shareholders of US Airways and creditors of AMR, and who will run the merged airline, according to the people familiar with the matter.
US Airways' formal merger offer made in November, which calls for its chief executive, Doug Parker, to run the combined airline, proposed that AMR creditors own 70 percent of the equity and shareholders of US Airways own the rest, the people have said.
AMR management led by Chief Executive Tom Horton believes the airline's creditors should own more than 70 percent of the equity in a merged airline, according to the people. It also remains unclear if Horton and the AMR board would ultimately agree to Parker taking the helm.
Horton rebuffed an aggressive takeover push from US Airways early in the bankruptcy process, saying the airline preferred to exit court protection on its own and consider a deal later.
But after several months of talks with its own creditors as well as US Airways, Horton has softened his approach and agreed to consider all options.
A combined American-US Airways would give American the scale to match bigger rivals that are upgrading service and expanding international routes. The merged company would have revenue of $38.69 billion based on 2012 figures, in front of United Continental which had revenue of $37.15 billion last year.
The new American would have a solid presence on the important U.S. East and West coasts and on North Atlantic routes, given American's revenue-sharing joint venture with British Airways and Iberia.
American has hubs in New York, Miami, Chicago, Los Angeles and Dallas/Fort Worth, while US Airways has key operations in Phoenix, Philadelphia and Charlotte, North Carolina.
The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.
(Reporting by Soyoung Kim; Additional reporting by Karen Jacobs and Nick Brown; Editing by Tim Dobbyn)

German flights hit by security staff strike


(Reuters) - Passengers travelling through Germany's Duesseldorf and Cologne airports faced a second day of disruption on Friday as security personnel continued a strike over pay.
More than 100 flights were cancelled at the two airports, with Germany's largest airline Lufthansa (LHAG.DE) scrapping over 80 flights at Duesseldorf alone.
Trade union Verdi has called for a 33 percent increase in pay for around 1,000 security personnel employed by private firms at the two airport.
It says the majority of security staff in the German state of North Rhine-Westphalia, where the two airports are located, are on hourly pay of 8.23 euros ($11) and wants that increased by 2.50 euros to pull workers out of the low pay sector.
The BDSW association representing the security firms has called the pay demand "completely excessive" and said the strike is out of proportion. It has offered a pay increase of 9.22 percent.
Verdi has said the strikes could go on indefinitely and could be extended to include other staff and security personnel in a show of solidarity.
The strike had already resulted in around 200 flights being cancelled on Thursday.
Duesseldorf is Germany's third largest airport after Frankfurt and Munich.
($1 = 0.7477 euros)
(Reporting by Victoria Bryan and Peter Maushagen; Editing by Alison Williams)

Japan's airlines back Boeing, as battery probes make slow progress


(Reuters) - Japan's leading airlines are firmly behind Boeing Co's 787 Dreamliner, saying they have had no second thoughts on orders for several dozen more of the planes - even as they have $5 billion worth of the futuristic aircraft sitting idle pending a complex investigation into unexplained battery problems.
All Nippon Airways Co and Japan Airlines Co Ltd have been the biggest customers to date for the technologically advanced 787 jetliner, which has a list price of $207 million and is about one third made by Japanese companies - from fuselage and engine parts to batteries and toilets.
U.S. safety officials said on Thursday they were nowhere close to completing their probe into a battery fire on a JAL-operated 787 at Boston airport almost three weeks ago. [ID:nL1N0AT9JR] And investigators in Japan, looking into a later incident that prompted an ANA 787 to make an emergency landing on a domestic flight, have made little headway in finding out what caused a lithium-ion battery to overheat, triggering alarms in the plane's cockpit.
All 50 Dreamliners in service were grounded on January 17.
The painstaking reconstruction effort - which Japanese authorities are running in tandem with U.S. safety officials - and the lack of key performance data, suggests it could be months before the 787 can return to commercial service - a potentially costly setback for both Boeing and the airlines banking on the plane for growth.
CIRCUIT BOARDS
U.S., Japanese and Boeing representatives have spent time this week at the Kyoto headquarters of GS Yuasa Corp, which makes batteries for the Dreamliner, looking at everything from manufacturing quality to technical standards. The charred battery remains the focus of the probe.
Critical circuit boards that control and monitor the performance of the battery unit were so badly burnt in the Japan incident that they may yield little data to help investigators, said a person involved in the probe, who didn't want to be named as it is ongoing and findings are only preliminary.
As a result, investigators have been poring over other components in the plane's complex electronics systems for clues as to how the battery was performing at the crucial time it began to overheat, the person said.
"The circuit board (system) is badly damaged. We'll see how much we can learn from examining it, but we'll also have to look at other recording devices on the aircraft to try to find out what happened," the person told Reuters.
That relatively inexpensive circuit boards may be keeping $10 billion worth of high-tech aircraft idle underscores how dependent the Boeing jet is on advanced electronics rather than more traditional, but less fuel-efficient, parts, experts said.
The Japanese investigators have said it doesn't appear the damaged battery was overcharged, echoing similar findings in the Boston incident. And on Friday, another potential lead - that the batteries could just be part of a 'bad batch' - was ruled out when Japan's transport ministry said the two batteries were made on different dates.
After checks, investigators plan to send the damaged battery monitoring unit to its manufacturer, Fujisawa-based Kanto Aircraft Instrument, for further tests. The battery's charger will also at some stage be returned for detailed inspection by the firm that makes it, Arizona-based Securaplane Technologies Inc.
The investigation is proving more problematic as this is the first time many of the investigators have seen a 787, which is not just an unfamiliar new plane, but is full of new technology.
Japanese Transport Minister Akihiro Ota told reporters on Friday: "I feel we might have come to the stage where it is time to consider whether it is necessary or not to try to reinforce (the investigation) structure."
NO CHANGE ON ORDERS
Both ANA and JAL said that comments from the National Transportation Safety Board (NTSB), the U.S. safety regulator - that the probe could be long and the concerns over air safety were "very serious" - would not affect their 787 orders.
"We have no plans at the moment to change our order," said Sze Hunn Yap, a spokeswoman for JAL, which has 7 Dreamliners with another 38 on order. Ryosei Nomura, a spokesman for ANA, which has 17 of the 787s and another 49 ordered, told Reuters: "We are currently not considering a change to our order. We are looking forward to seeing an even safer 787 back in the air."
ANA cancelled more flights scheduled to use the Dreamliner, bringing the carrier's total cancellations since the January 16 emergency landing to 459. The carrier, which says it flies around 3.7 million passengers each month, said the cancellations so far - and it will announce more on Saturday - had affected more than 58,000 passengers. At this time of the year, ANA normally offers more than 780 domestic flights and over 170 international flights a day.
While Japan's airlines remain firmly committed to the Dreamliner, Poland's LOT has raised the prospect of seeking compensation for its losses. Another customer, China's Hainan Airlines Co Ltd, said it was disappointed in the 787 delays, which would impact its expansion plans.
Investors, for now, seem unfazed. Since the January 7 fire at Boston, shares in Boeing have dropped 3 percent, while shares in ANA and JAL are down 2.7 percent and 2.5 percent respectively.
(Additional reporting by Kevin Krolicki, Mari Saito and Antoni Slodkowski; Writing by Ian Geoghegan; Editing by Nick Macfie)