Filing it under "stuff happens" will no longer do. Two Japanese airlines grounded their fleets of Boeing 787 Dreamliner aircraft on Wednesday after one was forced to make an emergency landing. That followed a series of glitches that have hit the 787 in the past few weeks. A cracked window or an oil leak might be passed off as just one of those things. An emergency landing is a more serious event.
What All Nippon Airways and Japan Air Lines have done will be noted gravely by other airlines flying or awaiting delivery of the all-singing, all-dancing aircraft. But investors should sit tight. It is too early to say what the financial impact of the accumulating problems will be for Boeing.
A review of the 787 by the U.S. Federal Aviation Administration announced on Friday will probably be more intense now. On the face of it, an emergency landing does not change the nature of the test facing Boeing: the mishaps are primarily technical and engineering in nature, not financial. One area that deserves FAA scrutiny is the supply chain: More than 50 of what Boeing calls "the world's most capable top-tier supplier partners" are contributing to the 787 from 135 sites globally. That creates plenty of scope for failure of quality control.
The biggest risk of a substantial financial hit for Boeing will be if the latest incident undermines the 787's production schedule. The aircraft is already over budget and entered service at least three years behind schedule. The 787 had been burning cash as a result. That was supposed to slow as production was stepped up – Boeing planned to double production of 787s to 10 a month by the end of 2013. Analysts had begun to anticipate rapidly improving free cash flows, roughly doubling to $7.5-billion (U.S.) by 2014, enabling Boeing to resume share buybacks. Until it gets ahead of the technical problems, though, that looks highly unlikely.