All Nippon Airways, Asia's top airline by revenue, has cancelled close to 850 flights over a 4-week period and rescheduled more than 82,000 passengers due to the grounding of the Boeing 787 Dreamliner jet with undiagnosed battery problems.
Yet the market value of the plane's first customer, at close to $7 billion, has nudged down only by the list price of one of the futuristic aircraft - $207 million - and just two analysts have revised the carrier's full-year earnings outlook. The cost of insuring ANA's debt against default for five years has halved in three months.
"When you're the launch customer there's going to be problems, and when you add the previous Dreamliner delays into the mix, the reaction from ANA investors is just 'Here we go again'," said Shashank Nigam, CEO of SimpliFlying, an airline industry consultancy.
ANA has put the technologically advanced 787 at the center of its growth strategy, as the fuel-efficient plane opens up new international routes that the carrier's existing fleet can't handle. But its 17 Dreamliners are now idle following a battery fire on a Japan Airlines 787 at a U.S. airport and an emergency landing by another plane on a domestic ANA flight after battery problems triggered a smoke alarm.
The airline is expected to say later on Thursday that its October-December net profit rose 26 percent, according to Thomson Reuters - the quarter before the recent incidents that led up to the grounding of all 50 Dreamliners worldwide. Operating profit is seen slipping 5.6 percent to 38.7 billion yen ($426.9 million), according to Thomson Reuters SmartEstimates, on revenue up 3.3 percent to 377 billion yen.
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To put ANA's Dreamliner and flight cancellation numbers into perspective: The 787 accounts for 7 percent of its fleet, and the airline normally operates around 1,000 flights a day and carries about 3.7 million passengers each month.
Pilots Grounded, Too
Neither ANA nor JAL, which has seven 787s, have said they have considered changing orders for 87 more of the Dreamliners.
"Obviously (the grounding) is a cost increase, but it's not a massive change of fleets," said one foreign hedge fund manager. "It is going to be a drag on earnings, but I don't think it's going to be material."
For now, ANA has around 150 trained 787 pilots staying at home. As flights are rescheduled, the carrier's Boeing 777 pilots are having to take the strain, with the extra workload.
Nicholas Cunningham, an analyst at Macquarie Capital Securities in Tokyo, said ANA needs to replace its Boeing 767s, a medium-size aircraft with 200-300 seats. "The 787 is ideal for that. It has better fuel economy and as a medium-body aircraft offers flexibility for domestic and international routes," he said.
Investigators in Japan and the United States have made little progress in finding the cause of the problems with the Dreamliner's lithium-ion batteries, suggesting the aircraft's grounding could weigh on both Boeing and the airlines for some time.
"Even if the grounding lasts longer, which would be an inconvenience and a negative for the two airlines, at this point it doesn't look to be a big enough issue for them to reconsider their entire corporate strategy," said Macquarie's Cunningham, who reckons six months of Dreamliner inactivity could knock 5-7 percent off his firm's annual operating profit estimate for the carrier.
ANA has said it may have to scale back its 2-year business plan - which it normally issues during the first calendar quarter. Its current plan aims to grow operating profit by 44 percent to 130 billion yen ($1.43 billion) for the year to March 2014.
Shares of the Japanese carrier are down 1.6 percent since Jan. 7, the day of the JAL battery fire, underperforming a 4.9 percent rise on the benchmark Nikkei 225.
"Investors are in wait-and-see mode with ANA as there is uncertainty over the Boeing incident," said Mitsushige Akino, a fund manager at Ichiyoshi Asset Management. "They may hold the shares until more details emerge."