(Reuters) – Investigators are looking into whether a fire on a Boeing Dreamliner in London last week was caused by the battery of an emergency locator transmitter built by Honeywell International Inc, according to a source familiar with the probe.

Passengers and investors appeared to take the news in their stride, as airlines continued to fly the plane and shares in the U.S. company regained most of what they lost on Friday, closing up 3.7 percent at $105.66 on Monday.

Honeywell said it had joined the investigation into Friday’s fire aboard the parked 787 at Heathrow airport but declined to discuss details beyond saying it had no previous experience of difficulties with this type of transmitter.

Boeing declined to comment on the transmitter.

In 2009, the Federal Aviation Administration (FAA) told airlines that a Honeywell transmitter had failed in tests and advised them to replace it, and other global regulators published similar advisories. There was no indication of fire risk from the unit.

Honeywell said it was checking whether the transmitter on the Ethiopian Airlines jet was the same model as one cited by regulators in 2009.

The 787 transmitter is located in the aft fuselage section and a fire from it was “theoretically possible,” said John Hansman, an aeronautics professor at MIT who has been an adviser to the FAA.

But Hansman said it seemed unlikely that the unit had malfunctioned, and that it was at least as likely that a passenger sneaked a cigarette in the lavatory and it smoldered for hours while the plane was parked at a remote stand at Heathrow airport before bursting into flames.

Britain’s Air Accident Investigations Branch (AAIB), which is leading the probe into the fire, said on Saturday it found no evidence the fire was caused by the lithium-ion batteries that were implicated in the 787’s grounding earlier this year.

The overheating in January of two battery packs that provide backup power to the plane caused regulators to ground the plane for three months and caused fleet-wide retrofits and delivery delays.

NEW TECH PLANE

Still, the focus on the emergency beacon raised alarms for some analysts, who said more technology problems with the new, high-tech airliner would be troubling.

“Unless the company can say for sure that the incident is isolated to this particular aircraft, it’s not welcome news,” said Richard Aboulafia, an aviation consultant with the Virginia-based Teal Group.

“The one systematic problem to plague the Dreamliner is that so many of its technologies are new that it is very difficult for the regulators to fully grasp all the changes,” he said.

Boeing only resumed deliveries of the planes in May after one of the plane’s lithium-ion batteries caught fire and another overheated, requiring a redesign of the battery system and the retrofitting of more than 50 planes.

The AAIB could take days if not weeks to determine the cause of the latest fire, although a source familiar with the investigation said an initial report could emerge this week.

Investigators are studying an emergency locator transmitter, or ELT, which is positioned in the upper rear part of the new airliner and sends a signal that leads rescuers to downed aircraft, said the source, who was not authorized to speak on the record.

Another source identified Ultralife Corp as the supplier of the battery that powers the Honeywell ELT. Newark, New York-based Ultralife was not immediately available for comment.

LITHIUM-MANGANESE

U.S. aviation and safety officials said it was the first time they could recall such a transmitter being investigated as the possible cause of an airplane fire.

The emergency transmitter is powered by a non-rechargeable lithium-manganese battery. The fact that it is not powered by a lithium-ion battery could allay concerns about a re-occurrence of problems that caused the earlier grounding.

Lithium-manganese batteries can be found in some flashlights, digital cameras and military applications.

Honeywell on Monday said its ELTs have been Federal Aviation Administration certified since 2005, are in use in numerous types of aircraft and “we’ve not seen nor experienced a single reported issue on this product-line”.

The company said it is participating in the investigation and that it was too early to draw conclusions about the cause of the fire, which left visible scorch marks on the outer skin of the plane. The fire occurred in an area where galley equipment such as water boilers and heaters are also located.

“It’s far too premature to speculate on the cause, or draw conclusions,” said Honeywell spokesman Nathan Drevna.

Honeywell said it had sent technical experts to London to assist with the investigation and would continue to work closely with Boeing and the U.S. National Transportation Safety Board.

Honeywell shares edged down slightly on Monday, closing off seven cents at $82.30.

NO IMPACT ON FLIGHTS, ORDERS

Analysts remained cautious.

“Anything that’s electronic in nature is more concerning than … some kind of human error,” said Jason Gursky, an analyst at Citigroup in San Francisco.

“The most important thing to keep in mind from an impact perspective is whether this is a systemic issue, or bad assembly, or a bad part, or somebody left the coffee pot on,” said Gursky

Britain’s AAIB on Saturday said it found no evidence the fire was caused by the 787s lithium-ion batteries that were implicated in the grounding earlier this year.

A 25-strong team of experts, including inspectors from the AAIB and the NTSB are investigating the damaged Dreamliner in a hangar at Heathrow airport, some 15 miles west of central London. The FAA and Boeing also are helping in the investigation.

Airlines, including Ethiopian Airlines, Britain’s Thomson Airways , U.S. carrier United Continental , and Poland’s LOT , said they would continue to fly their Dreamliners, while others, such as Virgin Atlantic said they would stick to their plans to buy the aircraft.

“Personally I’d fly on a Dreamliner tomorrow – I don’t think it’s a problem for the whole fleet like the battery issue clearly was,” said Howard Wheeldon, an aerospace analyst at Wheeldon Strategic Advisory.

“I’d expect the AAIB to know what caused the fire by the end of this week but the question for Boeing and Ethiopian Airlines is ‘is the plane repairable’?”

SOURCE REUTERS