Boeing 787

A Japanese investigator alleges that excess voltage in battery was the cause of problems in The Boeing Company (NYSE:BA)’s 787 Dreamliner, which has been grounded worldwide due to the risk of a fire outbreak.

Last Wednesday, the All Nippon Airways 787 made an emergency landing in western Japan, after the pilots of the aircraft noticed a burning smell and received a cockpit message indicating battery problems.

Authorities from the United States and Japan were conducting a joint investigation on the incident. Hideyo Kosugi, investigator for Japan Transport Ministry, said the condition of the battery of the Boeing 787 showed that the voltage applied exceeds the design limit.

According to Kosugi, the inside burns of the battery they saw from the All Nippon Airways 787 is similar to the Japan Airlines 787, which caught fire early this month. The same problem was also observed in the parked aircraft at the Boston Logan International Airport.

Kosugi said, “If we compare data from the latest case here and that in the U.S., we can pretty much figure out what happened.”

On Thursday, GS Yuasa Corporation (TYO:6674), the manufacturer of lithium-ion batteries for the Boeing 787 Dreamliner, sent three of its engineers to help in the investigation. At that time, the company said the cause of the problem was unclear, but it could be the battery, power source, or the electronics system.

Based on the initial findings of Japanese investigators, a flammable battery fluid known as electrolyte leaked from the main lithium-ion battery of the airplane beneath the cockpit. They also observed burn marks around the battery.

Aviation officials in Japan ordered All Nippon Airways Co., Ltd. (PINK:ALNPY) (TYO:9202) and Japan Airlines Co Ltd (TYO:9201) to suspend the flight of their Boeing 787 airplanes until safety issues were resolved.

The FAA issued the same directive to U.S. carriers. United Continental Holdings Inc (NYSE:UAL) which has six Boeing 787. It is the only carrier in the country flying the newest jet from The Boeing Company (NYSE:BA).

Analysts at Oppenheimer Equity Research opined that statistical probability strongly supports that the two recent flare-ups of the Boeing 787 can be traced to a bad batch of components rather than a systematic design flaw. According to them, “The 787 has had two battery incidents during its total 1.3M hours of flight time. If we assume these incidents reflect the probability that a design flaw is occasionally generating a random failure, we calculate that the probability as 1/650,000 (i.e., 2/13M). But, if those were indeed the odds, the likelihood that such an event would happen suddenly twice within a week (in ~4,000 of total flight time) would be only 1/53,000, which is extraordinarily unlikely.”

According to them, the answer to the Boeing 787 problems is the introduction of a bad batch of batteries. They speculated that the new planes might have been delivered with an old battery.

On the other hand, analysts at Imperial Capital said, “the issue could still be a range of issues,” although initial findings hints that the problem might be caused by lithium-ion batteries in Boeing 787. The research firm believed that there are still three primary causes of the recent problems including design issues, workmanship issues, or supplier quality issues. According to them, they do not think that it is a workmanship issue. In addition, the analysts said, “In our view, as long as it is potentially a design or integration issue, there is cause for concern.”

The analysts emphasized, “There are still much that is unknown to the recent 787 incidents,” and they are willing to give Boeing the benefit of the doubt. However, they said investors can’t ignore the near-term risks as well as the 787 problems.”