Event: Japanese airliners All Nippon Airways and Japan Airlines voluntarily grounded all flights of Boeing 787s, the Dreamliners, after All Nippon reported an emergency landing of one of the new craft. The incident was triggered by a cockpit warning of a potential battery problem and burning smells in the cockpit. This comes on the heels of a recent fire in Boston on another Dreamliner that was battery-related. Shares of Boeing (BA) have been under pressure since the Boston event and are down another 3% today after this most recent incident.
Analysis: The headlines are certainly sensational, but aircraft of all kinds often have certain mechanical issues that are not life threatening. That is especially true when a new plane is rolled off the assembly line. It takes time to work out the kinks. After the Boston fire, shares of Boeing dropped initially, but recovered. Look for the same reaction here. Boeing understands the issues with the aircraft and will do whatever is necessary to correct the issues. Over time expect fewer headlines and more focus on Boeing’s operating performance. Any pullbacks on sensational headlines should be used as a buying opportunity.
Action: Buy Boeing Calls on any sharp declines due to questions about the Dreamliner.
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