Boeing’s Terrible Year Is Coming to an End. Now What?

Just over a year ago, Boeing was having trouble keeping up with orders for its 737MAX. Huge demand for the popular 737MAX meant Boeing was struggling to deliver the craft, with the plane sold out until at least 2020.

So, how have the events of the last year impacted on Boeing, one of the biggest heavyweights of the aircraft industry?

Badly.

An Annus Horribilis

At the end of October 2018, a Lion Air 737MAX crashed in Jakarta, killing 189 passengers. The 737MAX fleet wasn’t grounded, and within five months, a second 737MAX owned by Ethiopian Airlines crashed killing another 157 people. Shortly after the crash, the 737MAX was grounded worldwide. November represents the ninth month of the grounding, but Boeing claims the aircraft will fly again by the end of 2019 – pending approval, of course.

Airlines, on the other hand, are less confident. Southwest, American and United Airlines have all removed the 737MAX from operating schedules until at least January 2020, and there is little guidance on when the aircraft is likely to fly again.

Given Boeing’s revenue, year to date, of $895M is less than half that earned last year, it’s no wonder it is eager to get the fleet back in the air.

The Report Confirms It – Boeing Was at Fault

The official Indonesian report for the Lion Air crash was released on 28 October 2019, a year after the accident. One of the key findings of the investigation, unsurprisingly, criticized Boeing’s design of the anti-stall system on the 737MAX, known as the Maneuvering Characteristics Augmentation System (MCAS).

It wasn’t all about Boeing, of course. As in the case with most crashes, there is more than one factor that contributes, and there was a range of recommendations made to the Indonesian low-cost carrier about its processes and the operation of the pilots involved.

Despite designing a series of fixes for the aircraft, the public’s opinion of Boeing hasn’t quite recovered – and that’s just one of its problems.

 

Boeing Has Experience in Damage Control

Given the fact that Boeing aircraft (alongside Airbus) dominate the skies, it’s not unusual that – historically – these aircraft manufacturers have learned how to control the media circus that surrounds these tragic events.

Boeing aircraft were involved in more than 240 fatal accidents over the past 60 years. These crashes have, in many cases, led to major technological advancements in the aviation industry, and helped to develop new processes, training methods and mechanisms for safety.

However, the 737MAX groundings are of a scale that even Boeing is struggling to manage – both in terms of the public image fall-out, and the sheer cost of sustaining the grounding. In September, Boeing announced it would start to pay $50M in compensation to the families of those victims lost in the two 737MAX crashes. This doesn’t prevent those families from taking further legal action against the airline. Last month, American Airlines pilots requested compensation for lost pay resulting from the groundings. The grounding of the 737MAX has supposedly cost Boeing just over $9B.

It’s no wonder that analysts are predicting a 42% drop in per-share earnings at Boeing compared to just a year ago.

The Pickle Fork Causing a Big Problem

On the first of November, Qantas grounded three of its 737 Next Generation aircraft after discovering hairline cracks in the wing structure of the aircraft. While the head of Qantas Domestic confirmed that the grounding was a prudent and preventative measure, it’s just another issue in a long line of issues swirling around Boeing products. These hairline cracks are in an area of the plane called the ‘pickle fork’, the piece of the plane that attaches the body to its wing structure.

To be clear – this issue impacts the Next Generation fleet, a completely separate version of the 737 to the ill-fortuned 737MAX. Following advice from the US Federal Aviation Administration (FAA) in October, Southwest Airlines took three planes out of service, and Korean Air removed five planes. Lion Air, who lost a 737MAX in the October 2018 crash, is also impacted by the pickle-fork problem.

The Boss Is Giving up His Bonus, but Will the Public Buy It?

Just a few days ago, the CEO of Boeing, Dennis Muilenburg, announced that he made the decision not to step down after the two 737MAX crashes. Instead, he stayed on – heroicly forgoing his annual bonus, he was at great pains to point out – with a view to ensuring that the safety issues with the plane are addressed. Representatives of the House Committee on Transportation and Infrastructure called upon the CEO to resign, with Rep. Jesus Garcia bluntly stating “A culture of negligence, incompetence or corruption starts at the top and it starts with you… I think it’s time that you submitted your resignation, don’t you?”

The pressure on Boeing the last year has been immense, and rightfully so. Last month, the company famously ousted Kevin McAllister, the head of the commercial airplane unit, responsible for manufacturing the 737MAX. While this is the least the company could have done in the situation, let’s weigh up the significance of that role. Nearly a quarter of the worldwide commercial aviation fleet are 737s. The head of commercial airplanes is one of the most coveted roles in the aviation industry worldwide, second only to the CEO roles at Boeing and Airbus. Someone is almost certainly licking their wounds.

Will the Public Vote With Their Feet?

The public may not buy the rhetoric of Boeing, but will it stop them flying on Boeing planes?

Probably not. Most passengers don’t pay attention to the type of aircraft when booking. While problems with the 737MAX have been widely publicized, it’s unclear to what extent these concerns would spread to other Boeing aircraft. Given the need for people to continue to travel and the fact that 10,000 airliners worldwide are made by Boeing, the company probably doesn’t have to worry about the bottom falling out of the market just yet.

Given the 737MAX represents up to 40% of company profit, though, Boeing had likely prepare for a future with less 737MAX orders and the implications of this for their bottom line. Having chewed through its backlog of prior-generation orders of the 737, it delivered only five 737 aircraft last quarter.

Pinning Its Hopes on the 777x

One possible ray of light is the Boeing 777X. Things certainly haven’t gotten off to a good start. Although the aircraft was meant to be first tested in 2018, publically, this has been pushed all the way back to 2020 – with the manufacturer hoping to test, and launch commercial flights, in the same year. Operational issues with the aircraft’s engines have been the main cause of the delay.

With a cargo door blowing out during ground testing in September, things have continued to be a little problematic with the 777X program. In October, Emirates announced that it didn’t think it would be receiving any of its 777X in 2020, another public relations blow for Boeing from a high-profile customer – particularly when they were to be showcased at Dubai Expo 2020.

However, the last month has seen some good news, at least. While 777X deliveries are now apparently delayed until 2021, Aviation Week claims that Boeing has finally received its first flight compliant GE9X engine, marking the restart of preparations for the start of 777X test flights.

Though a definite date isn’t given, it does mean that Boeing is one step closer to flying its 777X – and introducing its commercial production. Only time will tell the ability of Boeing to withstand the events of 2018-2019, but a shiny new aircraft with a number of confirmed orders – one that is both safe and economical to fly – is certainly not going to hurt the situation.

 

[Image: Wikimedia/Dan Nevill]