SAN JOSE -- The vexing battery problems that grounded the world's fleet of Boeing's new 787 Dreamliners are extracting a high cost from Mineta San Jose International Airport, which has bet its future growth on the fuel-efficient plane.
The indefinite parking of the 787s pending investigations by U.S. and Japanese agencies is a blow to the city's strategy to bring more international flights to Silicon Valley to meet the needs of its globe-trotting population and whittle down the massive debt from its billion-dollar airport makeover.
On Jan. 11, the San Jose airport celebrated the start of a five-day-a-week All Nippon Airways San Jose-Tokyo Dreamliner service -- only to see the route suspended a few days later after smoke filled an ANA 787 plane mid-flight in Japan. The week before, a battery caught fire on a parked Japan Airlines 787 in Boston.
Based on financial estimates by San Jose officials, the suspended service is costing the South Bay region an average of $214,000 a day in lost business. Worse, the indefinite suspension of the flights could discourage other international airlines from adding flights to and from San Jose.
"It's unrealized revenue and (a loss in) traction on getting a successful international service so others will follow shortly," said Kim Walesh, San Jose's director of economic development. "Everyone realizes it's not ANA's fault and it's not the San Jose airport's fault. But this needs to be corrected."
During a recent city airport commission meeting, San Jose Director of Aviation Bill Sherry said he plans to hire consultants to find additional cost-saving or new revenue-generating strategies to help cover massive debt on the airport's recent $1.3 billion makeover, which he and others had hoped new international 787 flights would help erase.
"We remain committed to ANA, our newest airline, and are fully supportive of them putting passenger safety first," Sherry said in a statement. "We acknowledge that revenue opportunity is delayed, but not really (at) cost to us since we didn't already have it."
Turmoil in the airline industry during the past decade has led to sharp cutbacks in flights to secondary airports such as San Jose. Annual passenger traffic at the San Jose airport has dropped 22 percent since 2007 -- from 10.6 million to about 8.4 million last year. Oakland International Airport suffered an even greater falloff during the same period: a 32 percent plunge, from 14.6 million passengers to about 10 million.
The midsize 787's fuel efficiency and long-range flying capability are ideal for smaller airports like Mineta, which does not have the web of connecting flights found at airports such as San Francisco International Airport, which provide the traffic to fill larger planes.
International flights are a major business boost for airports and their communities, said Robin Sobotta, chair of the department of business at Embry-Riddle Aeronautical University in Prescott, Ariz.. San Jose's ability to secure the ANA flight -- against tough competition from SFO -- is a big deal, she said.
For Chicago-based Boeing, the 787's battery problems come with a high price that is rising daily: Experts estimate the cost to the manufacturer could reach hundreds of millions -- or even billions -- of dollars. In a worst-case scenario, the company could be forced to write off about $5 billion in anticipated revenue, according Jefferies & Co. analyst Howard Rubel. Nonetheless, Boeing says the battery problems will not be a significant drag on 2013 earnings.
Japan's ANA said Thursday the groundings of its fleet of 17 Dreamliners forced the airline to cancel 459 domestic and international flights in January, resulting in $15.4 million in lost revenue.
"Every day that goes by, costs go up," said aviation consultant Michael Boyd.
Industry experts point out that it is common for new aircraft to be hit with numerous glitches -- the Airbus A380, for instance, experienced engine problems and cracked wings. But the inability of investigators to pinpoint the cause of the 787 battery malfunctions could keep the jetliner on the ground for a lengthy period, they say.
With other aircraft, officials "knew specifically what was causing the problem and they fixed it," Boyd said. "In this case, we know we have had two fires, but we don't know why and we don't know what the fix is. We've never had this before."
The plane's powerful lithium-ion batteries are relatively new to aircraft. Earlier this week, it was reported that the reliability of the batteries was in question even before the fire and smoke problems caused regulators to ground all 50 of the 787s in operation worldwide. ANA officials said the airline had replaced 10 batteries months earlier, further raising questions about whether Boeing and other airplane manufactures will be able to continue to use the batteries.
"Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers," Boeing Chairman and Chief Executive Jim McNerney said in a statement earlier this week.
United Airlines, which has six 787 jetliners, is the only American carrier operating the aircraft. But there are about 800 of the new 787s on order worldwide. The list price for the aircraft ranges from $206.8 million to $243.6 million.
Boeing most likely will be responsible for at least some of the costs piling up for airlines that have had to cancel flights, said Robert Herbst, an aviation industry consultant who operates airlinefinancials.com. "Boeing is going to have to make some kind of deal with them."
Richard Aboulafia, an aviation analyst at the Teal Group in Fairfax, Va., said the mounting problems could mean a fix is six to nine months away for the 787, which already has endured years of production and design delays.
"This is unprecedented turf in terms of delays and problems," he said, adding that the Dreamliner is, for the time being, "a dream deferred."
Contact John Boudreau at 408-278-3496; follow him at Twitter.com/svwriter.