Boeing resumes deliveries of 787 Dreamliners

NEW YORK Wed May 15, 2013 4:51am IST

A worker prepares the Boeing chalet ahead of the Farnborough Airshow 2012 in southern England July 8, 2012. REUTERS/Luke MacGregor/Files

A worker prepares the Boeing chalet ahead of the Farnborough Airshow 2012 in southern England July 8, 2012.

Credit: Reuters/Luke MacGregor/Files

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NEW YORK (Reuters) - Boeing Co (BA.N) resumed deliveries of its high-tech 787 Dreamliner jet on Tuesday, ending a period of nearly four months in which it was unable to provide new planes to customers because of safety concerns about the battery system.

The delivery of the first jet with a redesigned battery system marks a turning point in Boeing's 787 crisis, allowing the jet maker to book revenue for completed sales of the jet, which costs $207 million at list prices.

Boeing shares rose 1.4 percent to close at $96.11 on the New York Stock Exchange, their highest levels since November 2007.

Resuming deliveries will lower Boeing's profit margin in the near-term, though. The 787s being delivered now are among the relatively early jets that are more costly to make and that were sold at steep discounts to attract customers.

Boeing has never given a final cost estimate for the 787's grounding and repairs, though it absorbed nearly all of the impact in the first quarter while still posting a rise in profit. Some analysts have projected a final cost of as much as $600 million.

The deliveries will improve Boeing's cash flow this year, however, and will reduce its inventory, something investors have been anticipating as they bid up its stock.

Boeing said it delivered a new Dreamliner to All Nippon Airways (9202.T) on Tuesday, its second delivery of the year. The first was delivered before January 16, when regulators grounded the worldwide Dreamliner fleet after two lithium-ion batteries overheated and smoked on two separate jets that month.

Boeing also reaffirmed Tuesday that it expects to hit its target of delivering more than 60 787s this year.

Analysts say the target should be easy to hit. Boeing kept making Dreamliners while the plane was grounded, so about 25 are parked outside its factories waiting to be delivered to customers, the company said.

Boeing also has sped up production. Last week it rolled out the first 787 made at the new rate of seven per month, up from five per month previously. It aims to raise the rate to 10 per month by year-end, with the first delivery at the new rate in 2014.

BATTERY REDESIGN

After the two incidents in January, Boeing redesigned the 787 battery system, adding a steel enclosure and other safeguards to prevent fire.

The Federal Aviation Administration approved the redesigned system on April 19 and a few days later cleared Boeing to begin installing the $500,000 fix on the 50 delivered jets that had been grounded, and those still at the factory.

Ethiopian Airlines began carrying customers on the new jet on April 27. The other seven airlines that fly the jet have begun working them into flight schedules, many with service beginning later this month or in June. United Airlines(UAL.N), the first U.S. carrier with the 787, is due to resume service on May 31.

Boeing still faces potential problems with the new plane, its first all-new jetliner in more than a decade. New planes are typically glitch-prone, and the 787 is no exception, logging a string of minor mishaps in the months leading up to the grounding, ranging from fuel line leaks to brake problems and a cracked cockpit windscreen.

In addition, the U.S. National Transportation Safety Board is still investigating what caused a 787 battery to overheat and catch fire on a parked Japan Airlines(9201.T) plane in Boston. About a week later, another battery overheated on an All Nippon flight in Japan, prompting an emergency landing and evacuation.

The NTSB investigation, which included hearings in April, is expected result in recommendations to the FAA that could alter certification procedures for aircraft.

(Reporting by Alwyn Scott; Editing by Gary Hill, David Gregorio and Bernard Orr)

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