Boeing 787: The biggest lemon in history?

January 11, 2013: 9:40 AM ET

Far from it. In fact, many of the concerns over the new aircraft are vastly overstated.

By Cyrus Sanati, contributor

130108064349-boeing-787-gallery-horizontalFORTUNE -- The recent worries over the safety and soundness of Boeing's new 787 aircraft appear vastly overblown. The unfortunate series of technical glitches that occurred this week are not only minor in nature, but are also cheap to fix—that is, if any system-wide repair is even necessary. That doesn't mean Boeing is out of the woods.

It hasn't been the greatest week for Boeing (BA). The aircraft maker saw its stock tumble as much as 7% at one point this week due to three separate technical incidents involving its relatively brand new 787 aircraft. The first incident Monday morning involved a fire breaking out on a Japanese Air Line (JAL) aircraft that was sitting empty on the tarmac in Boston. The next day another JAL 787 in Boston was forced to turn back to the gate after its pilots discovered a fuel leak. And if that weren't enough, an All Nippon Airways 787 in Japan was forced to cancel its flight when the pilots received an error message related to the aircraft's braking system.

While a fire on board an aircraft and a leaky fuel system are concerning— especially given how sensitive the public can be about mechanical issues on an aircraft—the way the incidents have been portrayed have set off an unnecessary panic in general and among investors. For example, preliminary reports by the National Transportation Safety Board (NTSB) indicate that the fire broke out in one of the aircraft's two lithium-ion batteries, which are only engaged when the plane is on the ground and never in flight. The fire was small, creeping only two feet from its source, making it far from the raging inferno of people's nightmares.

The auxiliary battery may have overheated due to faulty wiring causing it to overheat. United Air Lines, the only US carrier to fly the new aircraft, reported that the wiring to lithium-ion batteries on one of its six brand new 787s was done improperly. If this turns out to be the root cause of the fire, then it would be a quick and cheap fix.

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Still, this isn't the first time that Boeing has had troubles with its "revolutionary" aircraft. Indeed, the Dreamliner program has been marred by a number of annoying technical glitches and hiccups since its inception a decade ago. But past troubles as well as those that occurred this week were all mechanical in nature and were not linked to the aircraft's radical design. Indeed, if a more fundamental design flaw was suspected in any way the Federal Aviation Administration would have grounded all 787s. An investigation is underway however.

This is an important difference because mechanical flaws are usually cheap and easy to solve while design flaws are potentially devastating. For example, a design flaw could force a potential recall of the 49 or so 787s that are already in use. It would also mean going back to the drawing board—a very expensive drawing board—to recalibrate a jet that is already three years behind on its original delivery schedule.

But while it is unlikely to be a design flaw, Boeing shouldn't get off easily. All the mechanical issues that have marred the 787 program over the years have now become inexcusable. All this talk about the aircraft having to "work out the kinks" or having "teething issues" and such is getting old. Could you imagine if an automaker told its customers that the small fire and fuel leakage on their new car was normal because it's new and was simply "working out the kinks?"

The original source of the 787's delays and technical difficulties laid in Boeing's disastrous plan to outsource the aircraft's production and some of its design across dozens of suppliers from around the globe.  Boeing learned the hard way that without control over the critical parts of its supply chain it left itself vulnerable to a number of annoying issues, such as delays. It also had to deal with quality control issues as parts arrived that weren't up to snuff while others simply didn't fit right.

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Boeing has taken back full control of the production process in the US but it still relies on foreign suppliers, like GS Yuasa, the maker of the 787s lithium-ion batteries, to deliver a quality product to them. Boeing needs to step up its quality assurance on its assembly line now before it ramps up production this year to 10 planes per month. If not, then all these little hiccups could give the aircraft the unfair reputation of being Boeing's big fat lemon.

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