Boeing tests prompt analysts' upgrades, but risks still lurk

NEW YORK, March 13 (Reuters) - As Boeing prepared to start testing a redesigned battery system aimed at preventing fires on its flagship 787 Dreamliner, analysts upgraded the company's stock and lifted their targets for the stock's price.

Some analysts said the high-tech plane, which was grounded worldwide in January, might be flying passengers again as early as May, after the Federal Aviation Administration on Tuesday approved Boeing's plan to certify the battery system.

Although the carbon-composite jet is only at the beginning of what could be a rigorous testing regimen, and still faces public hearings in April on the safety of its lithium-ion batteries, the FAA's approval of testing appeared to dispel clouds of uncertainty.

Investors have realized that "the 787 isn't the end of the world," said Ken Herbert, an analyst at Imperial Capital in San Francisco.

Instead, they are focusing on potential orders for Boeing and Airbus, including a $15 billion deal for Boeing 737s by Ryanair, that sources told Reuters the budget Irish carrier is close to signing.

"Investors are thinking there's more juice to this order cycle than people thought three months ago, and the 787 is not going to blow me up," he added.

Among the upgrades, Stifel Nicolaus & Co raised its target on Boeing's stock price to $100 from $85.

Boeing shares were up 19 cents at $84.35 at midday in New York, after climbing 1.5 percent on Tuesday after the FAA news.

But risks remain in the rosy scenario. Boeing still must prove that its fix for the battery system is robust, after batteries burned on two planes in quick succession in January. In one instance, the battery ignited into a hissing, smoking blaze inside a 787 parked in Boston. Smoke entered the cabin and the battery burned for 1 hour and 40 minutes, while firefighters shot it with flame suppressant, before the fire went out, according to investigators. In a separate incident nine days later, a battery overheated on a plane flying in Japan, prompting an emergency landing and evacuation.

Last week, the National Transportation Safety Board, the top U.S. safety investigator, said it would hold public hearings next month to examine Boeing's proposed fix for the battery system, and about lithium-ion technology in general.

The agency still has not determined what caused the batteries to overheat, and Boeing has pressed ahead with a solution, knowing that as further facts emerge, they could require shifts in the approach, though a wholesale change in the new proposed system is not expected.

"We have proposed a comprehensive set of solutions designed to significantly minimize the potential for battery failure while ensuring that no battery event affects the continued safe operation of the airplane," Boeing Commercial Airplanes CEO Ray Conner said in a statement on Tuesday.

It is not known what effect the 787 fires have had on public perception of the plane's safety. It is also not known whether issues might arise in the jet, which is packed with new technology: not just a new, lighter body made of carbon-fiber plastic, but a new electrical system that replaces heavier hydraulic systems standard on older-style aircraft. (Reporting by Alwyn Scott; Editing by Jan Paschal)

As Boeing prepared to start testing a redesigned battery system aimed at preventing fires on its flagship 787 Dreamliner, analysts upgraded the company's stock and lifted their targets for the stock's price.

Some analysts said the high-tech plane, which was grounded worldwide in January, might be flying passengers again as early as May, after the Federal Aviation Administration on Tuesday approved Boeing's plan to certify the battery system.

Although the carbon-composite jet is only at the beginning of what could be a rigorous testing regimen, and still faces public hearings in April on the safety of its lithium-ion batteries, the FAA's approval of testing appeared to dispel clouds of uncertainty.

Investors have realized that "the 787 isn't the end of the world," said Ken Herbert, an analyst at Imperial Capital in San Francisco.

Instead, they are focusing on potential orders for Boeing and Airbus, including a $15 billion deal for Boeing 737s by Ryanair, that sources told Reuters the budget Irish carrier is close to signing.

"Investors are thinking there's more juice to this order cycle than people thought three months ago, and the 787 is not going to blow me up," he added.

Among the upgrades, Stifel Nicolaus & Co raised its target on Boeing's stock price to $100 from $85.

Boeing shares were up 19 cents at $84.35 at midday in New York, after climbing 1.5 percent on Tuesday after the FAA news.

But risks remain in the rosy scenario. Boeing still must prove that its fix for the battery system is robust, after batteries burned on two planes in quick succession in January. In one instance, the battery ignited into a hissing, smoking blaze inside a 787 parked in Boston. Smoke entered the cabin and the battery burned for 1 hour and 40 minutes, while firefighters shot it with flame suppressant, before the fire went out, according to investigators. In a separate incident nine days later, a battery overheated on a plane flying in Japan, prompting an emergency landing and evacuation.

Last week, the National Transportation Safety Board, the top U.S. safety investigator, said it would hold public hearings next month to examine Boeing's proposed fix for the battery system, and about lithium-ion technology in general.

The agency still has not determined what caused the batteries to overheat, and Boeing has pressed ahead with a solution, knowing that as further facts emerge, they could require shifts in the approach, though a wholesale change in the new proposed system is not expected.

"We have proposed a comprehensive set of solutions designed to significantly minimize the potential for battery failure while ensuring that no battery event affects the continued safe operation of the airplane," Boeing Commercial Airplanes CEO Ray Conner said in a statement on Tuesday.

It is not known what effect the 787 fires have had on public perception of the plane's safety. It is also not known whether issues might arise in the jet, which is packed with new technology: not just a new, lighter body made of carbon-fiber plastic, but a new electrical system that replaces heavier hydraulic systems standard on older-style aircraft. (Reporting by Alwyn Scott; Editing by Jan Paschal)