By Tim Hepher and Alwyn Scott
PARIS/NEW YORK (Reuters) - The brochure for Boeing Co's (NYS:BA) aircraft repair service makes a simple assertion: "No one knows Boeing airplanes better than Boeing."
Now that claim is being put to a visible test as budget airline Norwegian Air Shuttle ASA (OSL:NAS) grounded a brand new, $212 million (131 million pounds) 787 Dreamliner over the weekend. The airline demanded Boeing fix the state-of-the-art jet, saying it needs repairs after less than 30 days in service.
Investment analysts say the glitch involving a hydraulic pump is minor and isolated, and it is unlikely to affect Boeing's stock price, which is towering at record levels.
But Norwegian Air's vocal airing of its complaints is another black eye for the troubled Dreamliner. It follows a string of electrical and other safety problems that included battery meltdowns so severe they prompted regulators to ban the long-haul jetliner from flight for more than three months this year.
On Sunday, Polish airline LOT 787 flying from Toronto to Warsaw was forced to land at Iceland's Keflavik airport after problems with its air system.
Norwegian Air's formal request on Saturday for Boeing to take charge of fixing the plane throw a spotlight on an often overlooked facet of the 787's performance: reliability. And it shows how quickly a plane that cannot fly can hit a carrier's bottom line.
Like other airlines with small long-haul fleets, Norwegian Air does not have a spare plane it can use if a jet breaks down. The carrier said it had to rent planes and cancel tickets when it could not use its 787s, and the company's stock has fallen 6 percent since a peak earlier this month, hit by a string of 787 problems and concerns about its broader business.
"Reliability is a big deal, especially for low-cost carriers such as Norwegian," said Russell Solomon, an analyst at Moody's Investors Service in New York.
But since the problem appeared to be a "one-off" and part of the normal growing pains for a new plane, he added, it probably would not unsettle Boeing investors.
HALF A DOZEN BREAKDOWNS
When Norwegian Air began long-haul operations this year, it aimed to capitalize on the Dreamliner's lower operating cost and the jet's promised 20 percent savings on fuel burn.
But the first two Dreamliners, delivered in recent weeks and part of a planned fleet of eight, broke down more than half a dozen times in September, forcing Norwegian Air to lease back-up planes on short notice or cancel flights.
Norwegian Air grounded its 787s several times, citing problems with brakes, hydraulic pumps and power. On September 23, the carrier said one Dreamliner was beset with problems in the oxygen supply to the cockpit. A problem with a valve on the airline's second 787 was repaired around the same time, but only after delaying a flight from Oslo to New York.
Boeing said the repairs of the latest problem, to be carried out in Stockholm where the aircraft is parked, would take a matter of days. That is much better than with the 787's volatile battery system, which grounded the worldwide fleet of Dreamliners from mid-January through late April.
"Norwegian has contracted with Boeing to provide engineering, spare parts and maintenance services for its 787s," Boeing said in a statement. "We regret the inconvenience and disruption caused to the airline and its passengers as a result of this process."
Norwegian Air was the first to sign up for Boeing's GoldCare maintenance contract for its 787s, and is still the sole 787 customer for the plan. The brochure says GoldCare "significantly reduces the risk of new airplane introduction surprises" and helps airlines keep the plane in service.
But the grounded planes have prompted Norwegian Air to voice its dissatisfaction with the aircraft.
"The aircraft's reliability is simply not acceptable," Norwegian Air spokesman Lasse Sandaker-Nielsen said on Saturday.
"Our passengers cannot live with this kind of performance."
Saturday's announcement capped a tough week for Boeing in which Commercial Airplanes Chief Executive Ray Conner flew to Oslo to face Norwegian Air bosses over the earlier 787 mishaps.
Boeing maintains a formidable global workforce to support planes, and tracks the status of out-of-order jets in real time at an operations centre in Seattle. But even so, the world's largest commercial jet manufacturer had appeared unprepared for the storm of negative publicity Norwegian Air stirred.
"They didn't do themselves any favours at all when Ray Conner went to Norway and did not talk publicly," said Richard Aboulafia, an analyst at the Teal Group in Fairfax, Virginia.
"There was no better signal for the airline to aggressively go public" with its complaints, he added.
The public relations furore appeared to ease after Conner met with Norwegian Air management on Wednesday. Boeing promised to locate spare parts centres at all of the airline's long-haul destinations and send a team of engineers to the Nordics to monitor the planes.
Said Norwegian Air Chief Executive Bjorn Kos after the meeting: "It was a positive discussion."
SERVICE BUSINESS TEST
All new airplanes have so-called teething problems when first entering service, and most are forgotten when the issues are ironed out. The Airbus (EAD.PA) A380 superjumbo had wing cracks that required reworking by the manufacturer, but that crisis faded from the headlines.
Boeing faces an additional test with the 787 and Norwegian Air because Boeing had claimed that the jet's advanced electrical systems and computerized fault-tracking would be both easier and cheaper to repair.
Boeing and rival Airbus also face a test of efforts to build lucrative after-sales service businesses to boost profit margins. Even as Boeing touts the reliability of its service, other airlines have been raising concerns about 787s.
A 787 operated by Poland's LOT airline had to land unexpectedly in Iceland on Sunday due to a fault in its air identification system, a spokeswoman for the airline said on Sunday.
Like Norwegian air, state-owned LOT airline has had a list of problems with its Dreamliners, including last week delaying flights after check-ups showed two planes lacked gas filters.
LOT also said last week that Boeing had until the end of the year to agree on compensation for the three-month grounding of the 787 because of the battery issues, or it would take the matter to court.
Norwegian Air's GoldCare maintenance contract has served only to deepen Boeing's PR troubles by giving the company direct responsibility for sorting problem out.
Still, Solomon at Moody's said it would take significantly more than Norwegian Air and LOT's problems to dent investor confidence in Boeing as an investment, or a credit risk.
It would have to be "something that called into question the viability of the program," hurting Boeing's reputation and finances, he said.
Instead, Boeing is "performing quite well in these two important regards," and still has strong growth prospects for its commercial plane business.
(Reporting by Balasz Koranyi in Oslo, Tim Hepher in Paris and Alwyn Scott in New York; Editing by Edward Tobin and Leslie Gevirtz)
- Airline Industry
- Boeing Co
- 787 Dreamliner