Two 787 Fleets Grounded, As Well As Overnight Optimism

Tyler Durden's picture

Those who went long Boeing in the last few days on hopes the "smoking battery" issue had been resolved, especially following Ray LaHood comment's he would fly the Dreamliner, which is rapidly becoming the Nightmareliner for Boeing, anytime anywhere, are about to be grounded, as is the entire 787 fleet of All Nippon Airlines and Japan Airlines following yet another incident forcing an emergency Dreamliner landing. This happened after ANA "alarms indicated smoke in the forward area of the plane, which houses batteries and other equipment, the airline said, and there was a "burning-like smell" in the cockpit and parts of the cabin. The plane landed at Takamatsu airport in western Japan, where the 129 passengers were evacuated using the plane's emergency chutes. The plane also carried eight crew members. ANA said that the exact cause was still undetermined. The event was designated as a "serious incident" by Japan's transport ministry, setting off an immediate investigation by the Japan Transport Safety Board, which dispatched a team to the scene." The result - a 4% drop in the stock so far premarket, and if any more airlines are to ground their fleet the implications for the backlog could be devastating, it will only get far worse for both the company and the Dow Jones average, of which it is part.

Elsewhere, as we already reported, Germany cut its 2013 growth outlook to 0.4%, down from 0.7% in 2012. However, while Juncker yesterday launched the first shot of verbal intervention in an attempt to keep German exports strong, today ECB's Nowotny confirmed that the confusion in Europe is as prevalent as ever, following remarks that the "panic in markets over the EUR is over, and the exchange rate is not a matter of major concern", which pushed the EURUSD higher by some 50 pips. While these remarks directly negated Juncker's, they also made sure that the export-growth driven Germany's recession is here to stay as every yard higher in the EURUSD means, several German GDP ends up several ticks lower. Pick your poison.

In other news the earnings season revs up a gear today as JPMorgan and Goldman Sachs kick off the reporting season for the US investment banks (before US market open). This should set the tone for the rest of the banking sector who report over the following few days including Bank of America and Citigroup tomorrow and Morgan Stanley on Friday. For the record, the market is expecting EPS of $1.22 and $3.66 for JPM and GS respectively. Importantly though, in recent months Q4 expectations themselves have been raised by around 7% and 18% for JPM and GS respectively, according to Bloomberg data. Indeed, expectations for the broader financial sector as a whole are high, with the financials industry sector rallying more than 13% since the lows in mid-November (vs a 8.7% gain for the broader S&P500).

Deutsche Bank's recap continues: In terms of yesterday’s US session, it was a day of two halves as a weaker-than-expected Empire Manufacturing print (-7.8 vs 0.0 expected) and another 3% drop in Apple set the scene for a weak open. From there, the S&P500 managed a 0.6% intraday rally to close with a gain of 0.11%, taking the benchmark to a new postfinancial crisis high of 1472. Driving the rally was a better than expected retail sales number (+0.5% vs +0.2% expected) which as our US economists point out, came amidst a recent spate of weaker consumer sentiment indicators including the UofMichigan (72.9 Dec vs. 82.6 Oct) and Conference board surveys (65.1 Dec vs. 73.1 Oct). Indeed retail stocks (+0.75%) outperformed on the day led by JC Penney (+3.4%), Tiffany’s (+3.3%) and Macy’s (+2.2%) – helping to offset another weak day for telecoms (-0.9%) and technology stocks (-0.6%). While on the topic of technology, Apple had its second consecutive day of +3% losses. Its stock price closed below $500/share for the first time since February 10th 2012 and is now about 31% below the all-time peak of $702 reached in mid-September 2012.

Across the Atlantic, the head of Fitch’s sovereign ratings team reiterated that another last minute US budget deal isn't consistent with a AAA rating, and the "self inflicted crisis" will put into question the predictability and reliability of US fiscal policy. The agency also said that the risks of the UK losing its AAA rating are increasing, adding that the Treasury's Autumn Statement that it would miss its 2015-16 target to start cutting the level of net debt had weakened the Treasury's "credibility".

In an interview in the FT, PM Rajoy said that his government’s reform programme will begin to bear fruit in the form of an economic recovery later this  year, and will “come through very clearly in 2014”. Rajoy also called for expansionist policies from countries that could afford it, probably referring to Germany. Mr Rajoy also insisted that Spain was right not to request aid from the ECB last year - and ruled out any such move for the time being. Mr Rajoy suggested he would only consider OMT in the event of fresh market turmoil. "The option is there, and it would be absurd to rule it out for all time," the PM said. (FT) Turning to overnight markets, most Asian markets are trading with a weaker tone paced by losses on the Hang Seng (-0.22%) and Shanghai Composite (-0.56%).

The Nikkei (-2%) is underperforming broader regional markets, despite better than expected November machine orders (+3.9%mom vs +0.3% expected), partly driven by profit taking following four straight sessions of gains. The JPY is continuing to strengthen across the board following comments on the newswires from the LDP’s Secretary General that a weaker JPY may be of concern for some industries. Staying in Japan, the Nikkei reported that the Abe government will present successors to BoJ Governor Shirakawa and his two deputies around February 15th.

In other interesting headlines, the EU’s Jean-Claude Juncker said that Euro’s recent rise against major currencies had resulted in an exchange rate that was “dangerously high”. The comment drove a late selloff in EURUSD (-0.57%) yesterday, although it remains about 1.7% higher than before the ECB’s meeting last Thursday. On the topic of central banks, Boston Fed President Rosengren said that the Fed could enlarge asset purchases if it were to become necessary. He highlighted that the Fed would want to see about a 0.5ppt drop in unemployment before it would begin to decide whether to halt purchases.

Turning to the day ahead, the German government is expected to publish its annual economic report that is reported to revise down the country’s 2013 growth estimate to 0.5% from a previous estimate of 1% (Reuters). Eurozone CPI, Italian trade data for November and a German 10yr bund auction are the other highlights of today’s European calendar. In the US, December CPI, industrial production, the Fed’s beige book and the NAHB housing market index are the main data releases. But all eyes will be on the JPM and GS results which are due at 12 noon and 12:30pm London time respectively.

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AgLand's picture

Japan knows all about tech melting down.

GetZeeGold's picture



The plane landed at Takamatsu airport in western Japan, where the 129 passengers were evacuated using the plane's emergency chutes. totally works.

General Decline's picture

I won't be boarding one of those until they get the first three crashes cleaned up.

GetZeeGold's picture



It's bound to be reported on MSNBC as a crash.....even though it technically didn't.....and the discussion on banning crazy flying machines will commence.

trav777's picture

having a fleet grounded is NOT exceptional.  The 380 has been through this, 777, all of them.

It's a battery problem with LiON batteries, the same thing that burnt up Chevy Volts and Macbooks.  It is std procedure in aviation to ground the entire fleet to resolve a component problem like this.  Be glad of that. 

PhD's picture

True that. The Screamdivers will be back in business, the U.S. economy depends on it

A Nanny Moose's picture

Pilots proverb: It is better to be on the ground wishing you were in the air, than in the air wishing you were on the ground.

GetZeeGold's picture



Word is the battery was made in China.......damn near everything is these days.

Vendetta's picture

time for world war so the international financiers can slip away in the midst of the fracas with their ill-gotten treasure

CPL's picture

When roughly 9% of the standard plane parts are recycled broken plane parts, it's not just 787's you need to be concerned with.  You hope you get a chinese boxed part, at least you know where in the supply chain it's come from so you've got someone to bitch about it to.


The other bits floating around that have been 'refurbished' are usually broken parts with a gross assumption someone stopped to refurbish the part sometime after it's removal.

Of course either way increases the chances of a plane falling out of the sky.  It's an odds spread you just don't want to win the jackpot on.

trav777's picture

and meanwhile...when is the last time a US carrier had a fatality?!?

The last notable incident was because of a flock of geese and still nobody died.

Vlad Tepid's picture

The only reason there areno fatalities on US carriers is because they ban the handguns the passengers would use to dispatch themselves rather than be subjected to zoo animal-like confinement under the lazy eye of crone-like harridans who were once mortal stewardesses.

A Nanny Moose's picture

C'mon...the crones were once young and very lovely....back when propellers outnumbered the jet engine.

stant's picture

dont give me a seven eight seven they smoke and they roll and digg a big hole dont give me a seven eight seven

ss123's picture

At least the chutes worked. I've always wondered if they were real or not.

1971's picture

Damn Gremlins!

spanish inquisition's picture

Here's Twighlight Zone episode, boarding a 787 with a wing level seat next to Shatner playing Shatner. It's all banter and a big joke, until you enter the Twilight Zone......

AssFire's picture

The same LaHood who would not drive a Toyota?

(Note: the accelerator problems were all caused by human error)

If Boeing moved the jobs to non-union areas; I'll bet that chrony fuck,

LaHood would have reservations about flying the Dreamliner.

zerozulu's picture

Camry's foot mat issue was to punish Toyota for being the #1 car maker in the world. ANA's grounding of Screamliner is the payback.

Time has changed. Now world has got courage to say fuck you.

xtop23's picture

"A serious incident." ...... hrmmm. They'll handle an airplane incident that might have injured 210-290 people appropriately, but melt down a few reactors that have given everyone in the country a 10-20 year shelf life and it's all rainbows and lollipops. 

On a side note. I wonder if Le Chiffre was shorting Boeing too. Somebody call M.

Winston Churchill's picture

Boeing Volt,or Fiska Dreamliner ?

Gotta love this green(soot black) tech.

shovelhead's picture

Switch the name from Dreamliner to Piledriver.

Problem solved.

qqqqtrader's picture

The name "Dreamliner" to me did always kind of sound like an option you could get whem buying a casket.

Miss Expectations's picture

I've been smelling smoke here in the rear cabin of the Obama Hope Flight for quite some time.

slackrabbit's picture

Looks like they cant blame piolet error for this one. Unless they bribe congress in to claiming the piolet was smoking...


Robin: Atomic batteries to power, turbins for speed.....Shit wait Batman, this isn't the Batmobile its a Boeing Dreamliner!

Batman: Screw this Robin, we're getting out and walking!!!



PS: I just read a belgium bank is giving away free umbrela's for depositors, not as good as Spiderman towels. but there a Batman clip for that as well



Pretorian's picture

No wonder why they cant keep with Airbus and European industry. But they can cause financial problems in Europe to bring it down the house. False flag is US zionist only option.

Flakmeister's picture

Do I need to report a missing inmate somewhere?

Flakmeister's picture

Technology ain;t like a Buck Rogers TV show, it does not always work as advertised and it gets exponentially more difficult. And the marginal value of that increased technology will shrink....And if you are not careful or unlucky you can collapse under the weight of the of your own complexity...

trav777's picture

LiON battery fires are suggestive of some uncomfortable truths about diminishing returns and technocornucopianism.

yogibear's picture

Let's see how good they are at finding delamination. A situation like Aloha's flight 243 would be a disaster, unlike aluminum?

The carbon fibers give the material the bulk of its strength, but fairly large cracks can be developed without breaking many fibers.

Dieselclam's picture

I don't recall reading that any of the problems are structural issues. If carbon fiber cracks, fibers are broken. If there is a delamination, fibers may not break. However, composite aircraft still have fasteners in them which stops the spread of delamination, and carbon fiber aircraft aren't a new idea. The B-2 bomber is carbon fiber and I don't recall hearing of any delamination/structural issues with that airframe either.

Dieselclam's picture

Perhaps Boeing's Quality Assurance leadership isn't as interested in quality as they should be or claim to be. But with the program 2 1/2 years behind schedule and billions of dollars over budget, one could reasonably assume that the amount of pressure on the factory Inspectors to roll airplanes out the door might be a touch excessive, especially in their non-union factories where push back would be met with walking papers. If that's what is going on, then none of these problems would surprise those guys.

Vendetta's picture

Yuasa, a japanese company, makes the lithium ion batteries for the 787

Conax's picture

Yuasa? In the motorcycling world, they make the good stuff.

For aircraft, I recommend Sears Die-Hards. Free replacement, kick it out of the flaming wreckage and bring it in!


Joe A's picture

To me it looks as if Boeing and Airbus are involved in an competition spiral where products are brought to market to outdo the competition. Haste is seldom good especially when it comes to developing tin/carbon fiber boxes to move people around at 33,000 feet.

trav777's picture

...which explains why they are constantly falling out of the sky

probably is HAAAARP or chemtrails or the illumilaterals with their conspiracy to kill us all

EZYJET PILOT's picture

Are you on PPrune Trav?