Battery fix sets 787s up for May deliveries

Boeing said Wednesday that it is aiming to begin delivering 787s again in early May.

The 787 has been grounded since mid-January because of smoldering batteries. Federal authorities have approved Boeing’s redesigned battery system.

The new battery setup has been installed on 10 787s that belong to airlines, and on nine more that have been built but not delivered, Boeing Co. Chairman and Chief Executive Officer Jim McNerney said Wednesday.

He said “the bulk” of 787s already in the airlines’ possession will get the battery fix by mid-May. Boeing has said each installation will take about five days.

Boeing has kept producing the 787 even though it was grounded. But it can only collect the cash from airlines when it delivers the planes - so restarting deliveries is important.

The fix should keep any battery problems “from affecting the airplane or even being noticed by passengers,” McNerney said on the company’s quarterly earnings conference call.

One 787 experienced a fire after landing, while smoke forced an emergency landing on another. Boeing has gotten clearance from the Federal Aviation Administration for a redesigned battery system that the company said should sharply reduce the risk of a fire. Once the FAA approves the fix on individual planes, airlines can start flying them again.

On Tuesday, United Airlines moved one of its six 787s to a Boeing facility in San Antonio, Texas, so it can get the battery fix.

Boeing expects to complete “the bulk” of fleet retrofits by the middle of next month, McNerney said.

Costs associated with investigating the battery faults, designing the fix and installing the new units will be “minor,” said Chief Financial Officer Greg Smith, who didn’t give a figure.

The total bill, including compensation to airlines for the 787’s down time, may never be known, said Ken Herbert, a San Francisco-based analyst with Imperial Capital LLC. Boeing usually repays carriers with discounts instead of cash, Herbert said in a telephone interview before Wednesday’s release.

“You’ll never know for sure what they negotiate,” he said.

Despite the 787 troubles, Boeing’s net income rose 20 percent in the first quarter.

The big airplane maker earned $1.11 billion, or $1.44 per share. Excluding pension contributions, Boeing would have earned $1.73 per share, well above analyst expectations.

Revenue fell 3 percent to $18.89 billion because Boeing delivered just one 787 before the plane was grounded.

Boeing still expects to meet its financial and delivery targets this year. That includes delivering at least 60 787s. It delivered 137 planes during the quarter, because faster production of 737s and 777s offset the lack of 787 deliveries.

During the quarter, Boeing delivered its first 777 built at a production rate of 8.3 a month, part of a five-year push to boost jetliner output more than 60 percent through 2014.

The 777 debuted commercially in 1995, and lists for as much as $315 million. The earliest version of the 737 began operations in 1968. The most expensive 737 has a catalog price of $107.3 million, though airlines usually buy at a discount.

Boeing’s board may approve a new 777 design this year, featuring upgraded engines and composite-plastic wings, Chief Executive Officer Jim McNerney said on the call. Work on a stretched version of the Dreamliner, or 787-10, may also get under way in 2013, he said.

The quarter didn’t include any special charges for the 787 or for the automatic government spending cuts that took effect last month.

Profit rose in Boeing’s defense and commercial airplane units, even though revenue fell in both.

Boeing shares rose $2.65, or 3 percent, to close at $90.83 after rising as high $92.65 in trading. That was the highest level for the shares since December 2007, according to FactSet.

Information for this article was contributed by Joshua Freed of The Associated Press and Thomas Black, Kevin Miller and Stephen West of Bloomberg News.

Business, Pages 25 on 04/25/2013

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