* Follows incident in Japan on Wednesday
* JAL, ANA already grounded their 787 fleets
* Shares fall 2 pct in after-hours trading
* Not expected to affect orders
By Andrea Shalal-Esa and Alwyn Scott
WASHINGTON/SEATTLE, Jan 16 (Reuters) - The U.S. Federal
Aviation Administration said on Wednesday it would temporarily
ground Boeing Co's 787s after a second incident involving
battery failures caused one of the Dreamliner passenger jets to
make an emergency landing in Japan.
The FAA said airlines would have to demonstrate that the
lithium ion batteries involved were safe before they could
resume flying Boeing's newest commercial airliner, but gave no
details on when that could occur.
Boeing said in a statement it was confident the 787 was safe
and that it stood by the plane's integrity.
"Boeing is committed to supporting the FAA and finding
answers as quickly as possible. The company is working around
the clock with its customers and the various regulatory and
investigative authorities. We will make available the entire
resources of The Boeing Company to assist," Chief Executive Jim
Its shares fell 2 percent in after-hours trading to $72.75
after the FAA announcement. The shares of GS Yuasa Corp
, a Japanese company that makes batteries for the
Dreamliner, fell sharply in early trading there.
"Ultimately, you can view it as a positive thing if they can
resolve what the issues are and give people confidence in the
safety of the aircraft. In the near-term, though, it's a
negative. It's going to force the company to make significant
investments," said Ken Herbert, an analyst at Imperial Capital
in San Francisco.
The 787, which has a list price of $207 million, represents
a leap in the way planes are designed and built, but the project
has been plagued by cost overruns and years of delays. Some have
suggested Boeing's rush to get planes built after those delays
resulted in the recent problems, a charge the company denies.
According to flight tracking website FlightAware, some seven
Dreamliners were in the air Wednesday night as the FAA order
came down, including a United Airlines flight that left Los
Angeles for Houston just a few minutes before the order.
United said the planes already in the air would land as
scheduled and that it would immediately comply with the FAA
The use of new battery technology is among the cost-saving
features of the 787, which Boeing says burns 20 percent less
fuel than rival jetliners using older technology.
Lithium-ion batteries can catch fire if they are overcharged
and, once alight, they are difficult to put out as the chemicals
produce oxygen, Boeing's chief engineer for the 787, Mike
Sinnett, told reporters last week. He said lithium-ion was not
the only battery choice, but "it was the right choice".
In Asia, only the Japanese and Air India have the Dreamliner
in service, but other airlines are among those globally to have
ordered around 850 of the new aircraft.
Boeing has said it will at least break even on the cost of
building the 1,100 new 787s it expects to deliver over the next
decade. Some analysts, however, say Boeing may never make money
from the aircraft, given its enormous development cost.
Any additional cost from fixing problems discovered by the
string of recent incidents would affect those forecasts and
could hit Boeing's bottom line more quickly if it has to stop
delivering planes, analysts said.
In the latest incident, All Nippon Airways Co Ltd
said instruments aboard a domestic flight indicated a battery
error, triggering emergency warnings. The incident was described
by a transport ministry official as "highly serious" - language
used in international safety circles as indicating there could
have been an accident.
That led ANA and Japan Airlines Co Ltd to ground
their 24 Dreamliners pending checks. Japanese transportation
officials said they could not immediately comment on the FAA
decision, as did a spokesman for JAL. An ANA spokeswoman said
the FAA's order meant the airline could not use its 787s on its
But barring a prolonged grounding or a severe and
uncontained crisis, aircraft industry sources say there is no
immediate threat of cancellations for the plane, even after the
FAA's decision to halt 787 flights.
Among other reasons, they cite the heavy costs of retraining
and investing in new infrastructure, as well as a shortage of
alternatives in an industry dominated by just two large jet
The Dreamliner's problems could sharpen competition between
Boeing and its European rival Airbus, which itself
experienced a dip in sales for its A380 superjumbo following
problems with wing cracks a year ago. The A380 crisis has since
eased and most airlines report the aircraft are flying full.