Costs Grow for Grounded Boeing Fleet

BoeingShares of Boeing (NYSE:BA) shed about 1.2 percent on Tuesday morning after a long market weekend filled investors with pessimism. Battery issues with the 787 Dreamliner remain unsolved, meaning fleets around the world are grounded until at least the end of January. Shares of Boeing are off 2.6 percent since the New Year, and the cost to affected carriers such as United Air Lines (NYSE:UAL) is building.

Reports indicate that the cost of keeping a 787 on the ground for All Nippon Airways, a Japanese carrier with 17 Dreamliners, is an estimated $1.1 million per day. For Boeing, if the issue is not contained to just the battery unit, it could force a larger re-design of the electrical system that would cause further delays.

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The situation with the 787 has revitalized questions about the FAA, its ability to keep up with the market, and its relationship with manufacturers. The old and ubiquitous argument that the complexity of technology will consistently outpace inspectors suggests that there will always be some risk. Combined with a global supply chain, regulators have an impossible job maintaining oversight. This means that some errors, or “growing pains,” always get through the certification process.

FAAThe nature of the beast is that most of the time, the manufacturers are the experts, not the FAA. Boeing presented officials with an enormously complex electrical system that was clearly not very well understood, otherwise testing would have revealed the problem. It’s easy to imagine innovative aerospace and aviation manufacturing done by Boeing that the FAA has no experience with.

This scenario has led to questions about the relationship between regulators and manufacturers. Regulators understand the tremendous economic impact of companies like Boeing. Deliveries of Dreamliners were already delayed for years for a number of reasons, and skeptics have drawn conclusions alleging that government is too cozy with business.

For its part, the FAA has addressed the need to review its review process, and make sure it is doing everything in its power to thoroughly vet new aircraft. Meanwhile, U.S. and Japanese aviation officials are heading all over the world investigating various suppliers and manufacturers of the electrical system involved, such as United Technologies Corp. (NYSE:UTX).

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