Union, Wall Street Give Boeing Benefit Of The Doubt As It Struggles To Fix Lithium-ion Batteries In Its 787 Dreamliner

The aircraft, which is made of ultra-lightweight composite materials to boost fuel efficiency by as much as 20 percent, has been flying commercially since 2011. Before its maiden flight, the aircraft garnered 753 orders, an industry record for a new commercial plane. Its current backlog of orders is about 800. Even given the three-year delay in delivery, the project had all the marks of a big success.

But several recent problems have raised questions about the viability of the aircraft’s advanced battery, at least with its current design. Last week a lithium-ion battery, which holds far more power than standard batteries but also can become so hot it ignites, caught fire in a Japan Airlines 787 parked at Boston’s Logan airport – without passengers –  prompting an investigation by the U.S. Federal Aviation Administration. Then earlier this week, an All Nippon Airways 787 made an emergency landing in western Japan after the pilot received an electronic warning that one of the lithium-ion batteries was overheaing.

Within hours, FAA ordered all Dreamliners to be grounded until further notice, and pundits began questioning the company's prospects.

"The situation is becoming a worst-case scenario for Boeing," Rick Newman blogged in U.S. News & World Report.

Almost immediately, investors punished Boeing, knocking down shares earlier this week by 4.6 percent.

But since then the aerospace giant has gotten two very public breaks from a couple of key partners, its unionized workers and several Wall Street analysts.

On Wednesday the Society of Professional Engineering Employees in Aerospace, which has been negotiating a new contract with Boeing for more than a year, extended an olive branch to the company.

“At this point, with the company facing all the uncertainty from the FAA probe, we think it’s in the best interests of the company, the customers and our members that we bring theses negotiations to a resolution,” said Ray Goforth, executive director of SPEEA, which represents 15,500 engineers and 7,400 technical workers.

“Our proposal is that we … take the areas where Boeing and SPEEA have been able to reach agreements, take those and where we haven’t been able to reach agreement we just use the status quo language.”

Meanwhile, on the other side of the country, financial analysts noted a series of mitigating factors that kept them upbeat about prospects for the Dreamliner.

“Following the Logan fire … we found confidence in the fact that none of the events from last week appeared to be connected to one another, which would indicate a more serious or systemic problem,” Carter Copeland, a Barclays Capital analyst, wrote in a note.

“Our other source of confidence came from the fact that the 787 fleet continued to fly (as safety remains the number 1 priority for Boeing, the FAA and the airlines), so our view was that 787s would not be allowed to remain in service if there was a serious risk to safety.

“Based on current data, we continue to expect relatively limited financial or production impacts. Despite investor skepticism around potential battery redesigns (which we'd chalk up to pure speculation), it seems clear to us that the company is heavily focused on proving out the design of the current batteries, which they have continued confidence in,” said Copeland.

Some analysts criticized investors for driving down the share price, saying that the decision of the All-Nippon Airways pilots to make an emergency landing earlier this week was made out of an abundance of caution, Robert Spingarn, a Credit-Suisse analyst, told clients in a note.

“We think the selloff is overdone. The last two lithium-ion batteries in the 787 incorporate four levels of redundancy, the last of which allows an overheating cell to burn out and vent smoke outside the aircraft. We think this likely happened as designed, but the crew erred on the side of caution and made an emergency landing at its discretion," Spingarn wrote.

He also noted that other airlines, like United, Qatar, Ethiopian and Air India, continue to fly their 787s.

By late Thursday investors appeared to be rethinking their pessimism about Boeing’s prospects. Shares closed up xxx to xxx.