British aviation investigators identified an emergency beacon made by Honeywell International Inc as a likely source of last week's blaze on a Boeing 787 Dreamliner and called for it to be turned off, spurring a rally in Boeing shares by relieved investors.

Concerns about the carbon composite jet soon resurfaced, however, after a Japan Airlines 787 returned to Boston's Logan airport a with a possible faulty fuel pump.

A spokesman for the U.S. Federal Aviation Administration said that incident was not an emergency, but nervous investors sent Boeing shares down 1.5 percent in afterhours trade. Japan Airlines spokesman Hisanori Iizuka said the pilot decided to turn back "as a precaution."

The 787 program has been plagued by problems since January, with aircraft grounded after the overheating of lithium-ion back-up batteries.

UK officials said the fire at the parked Ethiopian Airlines at Heathrow was not related to the January incidents. The Air Accidents Investigation Branch (AAIB) said a locator beacon and its lithium-based battery was the only equipment on the plane that was near the fire and had the power to start it, and called regulators to review the use of these beacons.

Boeing said the locator beacon is not required by U.S. Federal Aviation Administration regulations, although some other nations do mandate their use. The plane maker said it would be removed from its newest model plane.

"ELTs are not required as part of the airplane design. There was no requirement to operate the ELTs during 787 flight test," said Boeing spokesman Marc Birtel.

The beacons, also called emergency locator transmitters (ELTs) are powered by non-rechargeable, lithium-manganese batteries used for decades in products like digital cameras, walkie-talkies and pacemakers.

NO QUICK REMOVAL

For now, airlines will keep flying with their emergency beacons in place until the FAA instructs them to do otherwise. With most big jets closely monitored on radar and with other means for rescuers to locate downed jets, the beacons, required in most parts of the world, are not critical for safe flight.

The AAIB has left it up to the FAA to decide on removing the beacons, said a Japan's Civil Aviation Bureau (JCAB) official.

"Things won't moved forward until the FAA makes a decision," he said, declining to be identified as he is not authorised to talk to the media.

Japanese airline ANA, which owns 20 of the 68 Dreamliners currently operating, said it would await instructions from the JCAB.

In Washington, the FAA said it was reviewing the report, which pointing to a lack of fire detection or suppression in the space above the cabin said, "had this event occurred in flight it could pose a significant safety concern."

RAIN IN THE PLANE

The AAIB said it is still unclear whether the fire onboard the Ethiopian jet was triggered by a malfunction in the beacon's battery or some external force - such as an electrical short circuit - and said the probe would continue.

While the UK report focused on the beacon made by U.S. conglomerate Honeywell, aviation experts said 787's higher humidity, which helps keeps passengers more comfortable, may have been an issue. Water can conduct electricity, so high moisture levels could increase the likelihood of short circuits.

"The investigators are looking at everything, humidity, condensation and ... how things are installed," said one industry source.

They are checking if there was enough insulation to prevent moisture from condensing and short circuiting systems such as the beacon, said the source, who was not authorized to speak publicly.

A source close to Boeing, speaking on condition that he not be named, said the 787 may need better isolation of electrical components from the plane's high humidity, something industry people refer to as "rain in the plane".

"There's nothing about this finding that indicates a lack of safety with the plane, but on the other hand there's no conclusive proof that a system unrelated to the plane is to blame," said Richard Aboulafia, aviation consultant with the Virginia-based Teal Group.

Analyst Yan Derocles of Paris-based Oddo Securities agreed. "We have to wait for the conclusions and at that point it could be a problem for Boeing, because the succession of incidents could chip away at confidence in the 787," he said.

HONEYWELL

Honeywell pledged to help Boeing and the airlines as needed, but cautioned that it was premature to jump to conclusions about the fire. It said it did not expect any financial impact from the AAIB's recommended action.

The battery cells in the beacon showed signs of "disruption" the AAIB report said. "It is not clear however, whether the combustion in the area of the ELT was initiated by a release of energy within the batteries or by an external mechanism such as an electrical short."

The battery linked to the London fire is made by Newark, New York-based Ultralife Corp, according to an industry source. Ultralife did not return calls or emails seeking comment. Its shares fell 1.8 percent to $3.76.

The AAIB said Honeywell had produced some 6,000 ELTs of the same design, which are fitted to a wide range of aircraft, and this had been the only significant "thermal incident."

UNRELATED

UK investigator AAIB said last week's fire was unrelated to the January incidents on 787s that grounded the advanced carbon composite aircraft for more than three months.

Investigators have yet to determine what prompted the batteries involved in those cases to melt down. Boeing resolved the issue by encasing the battery on a fireproof steel box, and cutting a vent in the plane to dump smoke from any overheating batteries in the future.

The fuel pump warning on the JAL flight from Boston on Thursday was unconnected with either the melted batteries or the emergency beacons, the carrier said.

Flight JL007, bound for Tokyo with 184 passengers on board, got a maintenance message related to the fuel pump about three hours after leaving Boston, JAL said. The plane landed safely back at the airport at 6:16 p.m. (2216 GMT), and there was no sign of smoke, it added.

Shares of Boeing closed 2.7 percent higher at $107.63, near the high of $108.15 reached a week ago before the fire. The Boston incident then saw the shares slip to $106. Honeywell shares rose 0.6 percent on Thursday to close at $82.97.

JAL's shares dipped 0.9 percent in early trading in Tokyo, with ANA unchanged from yesterday's close, compared with a 1.1 percent decline in the benchmark Nikkei 225 index. – Reuters