Is Boeing Approaching a Dreamliner Diagnosis?

BoeingIn what is hopefully a sign that a diagnosis for the puzzling issue with the lithium-ion batteries on board its 787 Dreamliner has been reached, Boeing (NYSE:BA) has asked the Federal Aviation Administration for clearance to conduct test flights of the aircraft.

Reports indicate that the flights would test a potential fix to the issue that resulted in the international grounding of the 787. The Seattle Times, citing sources with knowledge of the matter, suggests that test flights could be conducted as early as this week. If all goes well, there is a chance that the aircraft could return to commercial operation by the end of the month.

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The timeline is highly speculative, but it does strike an optimistic note for both the company and investors who have a material reason to fear every increase in the duration of the investigation. Japan Airlines and All Nippon Airways, which own a combined 24 Dreamliners, have expressed that they will seek compensation for costs related to keeping the aircraft grounded. Japan Airlines expects a 700 million yen ($7.54 million) impact on its earnings for the current quarter because of the ordeal.

It’s unclear if other carriers like United Air Lines (NYSE:UAL), which owns six 787 Dreamliners, will also seek damages, but as the investigation drags on the likelihood increases. Most carriers are struggling as it is, and United has underperformed its competitors on the stock chart over the past month. Announcing a charge related to the grounding of its Dreamliner fleet without any attempt at compensation is likely to draw shareholder backlash. As it stands, the carrier is operating with a negative profit margin.

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