Shares of Boeing (BA) are up 3% today despite another 787 flight cancellation, this time due to a brake problem. The incident marks the third time in as many days that a Dreamliner faced serious mechanical issues. On Monday a fire broke out due to a battery issue and on Tuesday a flight was cancelled after a pilot from a different airline noticed fuel spewing from the plane.
These are just the latest problems with the plane which has been plagued by production issues from the start. The company has delivered roughly fifty 787's thus far and has orders for 800 more. At a list price of $200 million each, the Dreamliner is expected to generate the bulk of Boeing's commercial aerospace division in the coming years. The question is whether or not Boeing is going to be forced to do a major overhaul of the program and, if so, what would that do to BA stock.
Jack Ablin of Harris Private Bank says Boeing doesn't have a huge problem. Yet. "The first of business is to really start the communication drum beating and at least let everybody know where things stand and what to expect," he says.
So far Boeing has been mum about what to expect, most likely because the company itself has no idea. The problems over the last three days seem to stem from entirely unrelated sections of the aircraft. Short of announcing a full recall, which is highly unlikely at this point, Boeing couldn't be expected to say much. What can be assumed is that each incident makes it less likely that the backlog of Dreamliner orders represents reality.
Ablin thinks the push back is going to come from the airlines but only after they start to lose business from concerned passengers. "Where I would be concerned is if the average traveler says 'you know what, I'm just not going to ride on this thing,'" he says. "When it starts impacting the airlines among rank and file travelers, that's going to be a problem for Boeing."
Investors certainly don't seem to think Boeing has an issue yet. When the Dreamliner starts getting put into regular rotation in the U.S. we'll see if that remains the case.
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