Boeing regains some ground lost after 787 fire

Boeing Co. shares are regaining some of the ground lost in Friday's session, after it was found the plane's batteries were not cause of a fire on one of its 787 planes in London.

WHAT HAPPENED: On Saturday, Britain's Air Accidents Investigation Branch said there was "no evidence of a direct causal relationship" between the 787's batteries and the fire in a plane owned by Ethiopian Airlines. The agency noted that the "extensive heat damage" was not near the two lithium-ion batteries that had been a problem in the past.

The airline's CEO, Tewolde Gebremariam, told The Associated Press on Saturday that there is "no flight safety issue" with the 787s and that Ethiopian Airlines, like other operators, hasn't made changes regarding the planes.

THE BIG PICTURE: When the 787 caught fire, investors wondered if the plane's troubled batteries were behind it. Immediately after the blaze, Boeing's stock retreated from the new 52-week high it had set earlier in the day, at $108.15. It closed at $101.87, down 5.8 percent from the high.

Earlier this year, smoldering batteries on two 787s caused the plane to be grounded for more than three months, and forced Boeing to rework the plane's battery system. Then came the images on Friday of fire crews putting out another 787 fire.

Boeing has said the 787's early maintenance record is similar to its 777. That long-haul plane, introduced in the mid-1990s, has a stellar safety record and been a best-seller for Boeing.

Boeing stock dipped briefly when the U.S. Federal Aviation Administration grounded the 787s on Jan. 16. Shares closed at a post-grounding low of $73.65 on Jan. 29.

THE ANALYSIS: "Fires on aircraft are extremely rare, and this incident will result in a very thorough investigation by BA and the related authorities," said Sterne, Agee analyst Peter Arment in a note to clients Monday. "However, based on early reports the fire points to a one-off issue that ranges from a ground power issue to a faulty part that shorted out."

Arment noted that the fire was above the back gallery area of the aircraft and near the last row of seats, where there are limited systems but "lots of wiring" for the gallery systems and the auxiliary power unit in the very rear of the aircraft.

"We believe investigators should be able to pinpoint the origin of the fire fairly quickly, given the amount of flame resistant materials that kept the fire within a contained area," the analyst wrote. "However, the challenge remains in figuring out what caused the spark — a short or hopefully a ground crew error. The latter remains a real possibility given the aircraft was hooked up to ground power and sat idle for almost eight hours."

"Thankfully, the British authorities have ruled out the batteries as a cause of the fire," he continued, theorizing that it will be several days before an official ruling on the event.

SHARE ACTION: Shares gained $2.55, or 2.5 percent, to $104.42 in morning trading.