Was There a Breakdown in Boeing’s Certification Process?

BoeingBoeing’s (NYSE:BA) strong fourth-quarter and full-year earnings report, released on Wednesday, was not enough to curb year-to-date losses. Shares are still off over 3 percent since the beginning of January as the company faces an international investigation regarding the lithium-ion batteries on board its flagship 787 aircraft.

It’s old-hat by now, but the investigation remains a tremendous liability for the company. Boeing has had orders for nearly 850 Dreamliners, only 49 of which have been delivered so far, and the investigation threatens to delay production. Boeing can’t transport new aircraft away from its final assembly facility until the investigation is complete and the Federal Aviation Administration lifts the grounding policy, and it’s unclear how long that will take. It’s also unclear whether Boeing will have to compensate carriers like United Air Lines (NYSE:UAL), which has six of the aircraft, for costs associated with the grounding.

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Investigators have scoured not just the aircraft itself but parts suppliers and component makers in an attempt to identify what caused a series of electrical malfunctions. The ordeal has also raised many questions and shed some light on the certification process that led to the aircraft being deemed safe to fly…

FAAIn an interview with Bloomberg, former U.S. National Transportation Safety Board chairman Jim Hall suggested that the FAA doesn’t necessarily have the budget or expertise to appropriately assess groundbreaking designs, like that of the 787. The aircraft is one of the first to use lithium-ion batteries at such a scale, and incorporates an innovative electrical system that few can claim to be experts on.

The result is a certification process that is, in many cases, delegated to Boeing’s engineers. Because the engineers effectively invented the technology used in the aircraft for that particular purpose, they are really the only people who know how it works. FAA regulators rely on their expertise when certifying aircraft, and give final approval largely based on their testimony and data they provide.

That’s not to say that government regulators are lost when it comes to new technology, but history suggests that every now and then the system breaks down. Flaws in the certification process have been cited as possible reasons for crashes in the past, and it’s not unreasonable to believe that somewhere along the line, something was overlooked in the 787.

“Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers,” commented CEO Jim McNerney in the company’s fourth-quarter report.

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