March 20, 2013
All Nippon Airways, the biggest customer for Boeing Co’s 787 Dreamliner, wants the planemaker to compensate it in cash, rather than discounts on future purchases, for losses racked up since the aircraft was grounded worldwide in mid-January, said a person familiar with ANA’s intention.
All 50 Dreamliners have been idled for two months after separate incidents with the plane’s battery at a U.S. airport and on a domestic flight in Japan. ANA operates 17 of those aircraft and has likely been hardest hit by having the plane out of service. The airline has canceled more than 3,600 flights to the end of May.
“ANA would prefer to have the cash,” said the person, who asked not to be identified, adding that compensation talks with Boeing had not yet begun.
“This is not something we have disclosed,” said ANA spokesman Ryosei Nomura. “Nothing has been decided regarding future talks with Boeing.”
Boeing has yet to say if it will compensate carriers for lost revenue from the 787’s grounding. Nor has it indicated how it would do this or how much it might pay. Persuading customers to accept discounts on future aircraft purchases would allow Boeing to spread any reimbursement costs over several years. Airlines, though, may see cash compensation as a quicker way to make up for their losses.
Boeing declined to comment on compensation issues. “There’s a singular focus on getting the airplanes returned to service. Our customers want that and we’re working hard to achieve that,” said spokesman Marc Birtel.
Boeing is reported to have already faced billions of dollars in fees for three years of delays in getting the 787 into service because of problems with a global production system.
Airlines receive a warranty on their 787s, which, while guaranteeing repairs, doesn’t obligate Boeing to compensate for lost business. In a proforma of a standard warranty, attached to a regulatory filing on the sale of a smaller type of plane to Southwest Airlines, Boeing typically guarantees its products are free from defects in material and design. Significantly, these include “selection of materials and the process of manufacture, in view of the state of the art at the time of design.” Battery experts said Boeing’s choice of lithium-ion batteries was current when the 787 was designed.