Boeing’s Dreamliner Review Puts Suppliers in the Spotlight

Source: Thinkstock

Source: Thinkstock

On Wednesday, more than a year after the review began, the Federal Aviation Administration announced that despite a series of technical problems, including several battery fires, Boeing’s (NYSE:BA) 787 Dreamliner aircraft “was soundly designed, met its intended safety level, and that the manufacturer and the FAA had effective processes in place to identify and correct issues that emerged before and after certification.”

That’s not to say there aren’t problems to be addressed. “The review team identified some problems with the manufacturing process and the way we oversee it, and we are moving quickly to address those problems,” said FAA Administrator Michael Huerta. The review team made four recommendations to Boeing and three to the FAA itself.

Most of the recommendations regarding Boeing, though, have to deal more directly with its suppliers than with Boeing’s actual manufacturing process. Specifically, the team recommended that Boeing should “continue to implement and mature gated design and production processes; ensure suppliers are fully aware of their responsibilities; establish a way to ensure suppliers identify realistic program risks; and require its suppliers to follow industry standards for personnel performing Boeing-required inspections.”

The review team’s recommendations for the FAA also include a revision to how the regulator collects data from and inspects suppliers, and the FAA is strengthening its supplier reporting process at all tiers of the supply chain.

Suppliers that attracted some attention during the Dreamliner review process include GS Yuasa, a Japanese company that manufactured the actual batteries in question, and United Technologies Corp. (NYSE:UTX), which built the power unit involved.

The FAA report follows shortly after comments made by Steven Udvar-Hazy, chief executive of Air Lease Corp., one of the largest lessors of aircraft in the world, were publicized by Reuters. Udvar-Hazy suggested that it’s not Boeing that regulators — and customers and investors — should be worried about, but suppliers.

“As you go down the supply chain, hundreds of suppliers, small suppliers, can they keep up with 100 single-aisle aircraft a month? That’s a big concern of ours, because a little guy can slip up and then it holds up everything,” Udvar-Hazy told the wire service. The question comes as Boeing and Airbus (NASDAQOTH:EADSY) both ramp up production in an effort to capitalize on soaring global demand for aircraft.

Boeing anticipates global demand for more than 35,000 planes in the coming two decades, which represents $4.8 trillion worth of aerospace investments. Boeing expects China alone to order 5,580 new planes valued at $780 billion over the next 20 years, a 16 percent share of the world market.