Boeing’s Rally Moves the Dow Despite Dreamliner Concerns

Boeing’s (NYSE:BA) 787 Dreamliner has made headlines all week after one caught fire at Logan Airport in Boston on Monday night. After that, a different 787 at the same airport sprung a fuel leak shortly before takeoff, and then issues with the brakes cancelled a Dreamliner flight in Japan.

Unsurprisingly, there are two sides to these issues and a whole lot of grey in between. In one corner are investors who put tremendously heavy selling pressure — four times average volume — on Monday and Tuesday, pulling the stock down 2.01 percent and 2.63 percent, respectively. In the other corner, investors who think that the market failed to check its emotions at the door, jumped on the dip, and bid the price back up over 3 percent on Wednesday.

This price action points to the obvious conclusion that headlines can move stocks, and Boeing’s series of unfortunate events is, at minimum, exactly that. Flight cancellations and delays due to mechanical or electrical problems with airplanes is by no means uncommon. It’s not the existence of these “growing pains” that is at issue, but whether or not their severity will be enough to cause existing and future airline customers to re-think their decisions.

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As of January 4, Boeing had 848 total orders for the 787 Dreamliner, 49 of which have been delivered, leaving 799 unfilled. At about $225.2 million per plane ($206.8 million for the 787-8, $243.6 million for the 787-9), it doesn’t take a quant to figure out that there is nearly $200 billion sitting on the table here. (Fun fact, Boeing invested about $32 billion to develop the Dreamliner.)

Here are the airlines who have received deliveries so far:

Airline Ordered Delivered
Air India 27 5
All Nippon Airways 66 17
Ethiopian Airlines 10 4
Japan Airlines 45 7
LAN Airlines 26 3
LOT Polish Airlines 8 2
Qatar Airways 30 5
United Air Lines 50 6

The fire and the fuel leak happened on Dreamliners owned by Japan Airlines, while the break problems were with a plane owned by All Nippon Airways. Both companies have since reiterated their commitment to their orders. An Air India spokesman commented on the news, “It’s a new plane, and some minor glitches do happen. It’s not a cause of concern.”

Even Qatar Airways CEO Akbar Al Baker, who previously criticized the plane for some minor faults — particularly an issue with engines made by General Electric (NYSE:GE) — said that the recent string of events “doesn’t mean we are going to cancel our orders. It’s a revolutionary airplane.”

Curiously enough, Boeing’s Wednesday rally makes it the day’s biggest Dow-component gainer, and has helped pull the index up 0.30 percent despite some steep losses from other members.

Investing Insights: Will the Dreamliner Carry Boeing through 2013?