Date: 2024-07-17 Page is: DBtxt003.php txt00026444
BOEING
A COMPANY BESET WITH PROBLEMS
Boeing Co.’s 737 Max jet was supposed to be the safest plane in the world. The perception is anything but.
A COMPANY BESET WITH PROBLEMS
Boeing Co.’s 737 Max jet was supposed to be the safest plane in the world. The perception is anything but.
A piece of the fuselage of a Boeing 737 Max-9 jet blew off during an Alaska Airlines flight.Photographer: David Ryder/Bloomberg
Original article:
Peter Burgess COMMENTARY
Peter Burgess
From a business standpoint, rival Airbus SE won the lion’s share of two major new plane orders from the flagship carriers of Japan and South Korea, markets in which Boeing has typically had an advantage. Boeing now expects to burn as much as $4.5 billion of cash in the first quarter and to generate only “low-single digit billions” for the full year, Chief Financial Officer Brian West said at the Bank of America Corp. conference this week. Both figures are much worse than analysts had estimated. Still, Boeing can fund a potential acquisition of fuselage supplier Spirit AeroSystems Holdings Inc. with cash on hand and new debt and doesn’t need to pay for the deal with stock, West said. One way the company might be able to come up with extra cash is by selling some of its various defense businesses — an option that it’s currently exploring, Bloomberg News reported, citing people familiar with the matter.
Boeing 737 Max Blowout Points to Pervasive Flaws
The grounding of a Boeing Max variant after a fuselage section came apart midair on an Alaska Airlines flight adds to the planemaker’s long list of problems
January 6, 2024 at 11:51 AM EST ... Updated on January 6, 2024 at 2:52 PM EST
Written by Brooke Sutherland ... Brooke Sutherland is Bloomberg News' Boston bureau chief and writes the Industrial Strength Newsletter. She was previously a Bloomberg Opinion columnist covering deals and industrial companies and an M&A reporter for Bloomberg News.
Boeing Co.’s 737 Max jet was supposed to be the safest plane in the world. The perception is anything but.
Almost five years after the second fatal crash involving the plane prompted a global grounding, and three years after the Federal Aviation Administration said the Max could safely return to US skies, the aircraft is still having troubling safety problems. The FAA on Saturday ordered a temporary grounding and immediate inspections of certain Boeing 737 Max-9 aircraft after a piece of the plane blew off soon after takeoff on a late Friday evening Alaska Airlines flight, leaving a gaping hole with views of the starry night where a panel should have been. Alaska Air Group Inc. had already stopped flying its entire fleet of the Boeing Max variant following the incident, while United Airlines Holdings Inc. had also pulled some of the model from service to conduct emergency inspections.
The FAA order affects about 171 planes worldwide. The Alaska Airlines flight was carrying 171 passengers and six crew members from Portland, Oregon, to Ontario, California. The plane in question was brand new, having been delivered only in October.
When passengers board planes, they should be prepared for possible delays, especially these days amid an onslaught of weather disruptions and the quagmires of an overtaxed aviation infrastructure. They should not be prepared for the plane to literally come apart in front of their eyes.
Accidents do happen: A woman died in 2018 after a mid-flight engine explosion on a Southwest Airlines Co. flight sent metal shrapnel into the fuselage, shattering the window she was seated next to on the Boeing 737-700 jet (a predecessor to the Max). It’s too soon to say whether there’s a systemic problem that makes the panels on the Max fuselage prone to blowing off. Alaska Airlines separately said it had completed inspection on “more than a quarter” of its 737 Max-9 fleet as of midday Saturday without any “concerning findings.” But it’s not too early to say that the Boeing culture and aerospace supply chain that produced this plane have systemic flaws that have not yet been properly addressed.
Given the plane’s checkered safety history, you can hardly blame Alaska for erring on the side of caution and grounding the entire fleet of the Max variant involved in the accident.
China’s aviation regulator is conducting an emergency meeting to consider a response to the incident, including a possible grounding of the Boeing Max fleet in the country, Bloomberg News reported, citing people familiar with the matter. The version of the Max involved in the Alaska Air incident isn’t flown by Chinese carriers. But the country was the first to ground the Max after its crashes and the last to restart commercial service amid heightened trade tensions with the US and air travel disruptions from the pandemic.
Boeing had 250 Max planes sitting in inventory as of the third quarter, 85 of which were being held for Chinese customers. Analysts had been growing increasingly optimistic that Boeing would soon restart 737 deliveries to China (and pocket the associated cash flow), but fresh safety questions and quality-control issues may delay that key benchmark yet again.
“It’s getting difficult to keep track of all of Boeing Co.’s myriad production issues, regulatory holdups, delivery delays and charges,” I wrote in April. That was when the company warned that two of the rear fittings that attach the 737 Max jet’s vertical tail to the body of the plane had been installed incorrectly by supplier Spirit AeroSystems Holdings Inc.
In August, Boeing and Spirit disclosed another, separate production glitch affecting the structure of the Max: Fastener holes in a component that helps maintain cabin pressure had been drilled improperly. This particular issue has proved costly and time-consuming to fix because mechanics must assess each hole by X-ray and, in many cases, work around already installed lavatories, kitchen galleys and overhead bins.
Boeing in October lowered its 2023 delivery target for the Max. In late December, the FAA said it’s monitoring targeted inspections of Max jets for loose bolts after an international operator discovered a missing nut while performing routine maintenance on the rudder-control system.
The two Max crashes — which killed a total of 346 people — were tied to flight-control software that was originally added to guard against an aerodynamic stall but was activated by a single sensor that malfunctioned and instead repeatedly forced the planes to nose-dive, setting off a cacophony of alerts that overwhelmed the pilots. In addition to requiring operating changes to that system, known as the maneuvering characteristics augmentation system (MCAS), the FAA also required a broader overhaul of the plane’s computers to improve reliability and the separation of bundles of electrical wiring that had the potential to short-circuit.
I’m probably forgetting something, but those are just the Max’s woes and fixes. Deliveries of the 787 Dreamliner were halted for more than a year as the company grappled with tiny wrinkles in the carbon fiber frame and regulatory scrutiny of its production process; the commercial rollout of the jumbo 777X jet has been significantly delayed until 2025; and the company keeps having to take writedowns on its defense programs as its past strategy of bidding low for fixed-priced contracts on the expectation that future service work would make up the difference continues to prove ill-advised.
In the wake of the Max crisis, Boeing has toughened up internal accountability safeguards and safety reporting protocols in its engineering ranks. The company also seems to finally have realized that pushing its suppliers to the brink is bad for business.
Boeing agreed in October to adjust contracts on the 737 and 787 programs for Spirit AeroSystems in a bid to stave off a potential cash-flow crisis at the key supplier. While the deal arguably only deepens a lopsided relationship that some analysts have compared to indentured servitude, it’s a far cry from Boeing’s pre-crisis “partnering for success” program that sought to squeeze costs out of suppliers and wring out higher profit margins for itself. Component makers referred to the program as “pilfering from suppliers.”
But Boeing Chief Executive Officer Dave Calhoun has continuously pushed back on the idea that the company's challenges are the result of deep-rooted cultural problems and resisted calls for more sweeping overhauls of the engineering and management ranks. He’s positioned himself as an outsider, even though he’s been on Boeing’s board since 2009 and as such arguably bears about as much responsibility for the company’s legacy of missteps as anyone else.
A surprising number of CEOs at Boeing clients were openly calling for management changes in mid-2022. The chorus of criticism has quieted recently but might resume should this latest Max setback prove structural in nature. The company announced in December that Stephanie Pope, the head of its services arm, will become chief operating officer. The position is often considered a steppingstone and sets Pope up to eventually succeed Calhoun when he retires. As I wrote at the time, Pope is immensely qualified for the CEO position, and it’s nice to see Boeing finally consider a woman for the top job. But the seemingly never-ending string of quality-control issues emanating out of Boeing suggests that this is still a company in serious need of fresh eyes.
The slap-on-the-wrist deferred prosecution agreement that Boeing entered into with the Justice Department in connection with the 737 Max crisis concluded that “misconduct was neither pervasive across the organization, nor undertaken by a large number of employees, nor facilitated by senior management.”
How many more issues have to emerge with Boeing airplanes before we can finally start calling this a pervasive problem? It seems as if we passed that point long ago.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story: Brooke Sutherland at bsutherland7@bloomberg.net
To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net
Brooke Sutherland is Bloomberg News' Boston bureau chief and writes the Industrial Strength Newsletter. She was previously a Bloomberg Opinion columnist covering deals and industrial companies and an M&A reporter for Bloomberg News.
Read more:
- Aviation Supply Chain Has Too Many Weak Links
- Boeing's 737 Max Crisis Wasn’t a One-Man Job
- Boeing Faces Chorus of Critics in High Places
- Chicago Bears and the Suburbs Were Never Going to Kick Off
- AI Gives Football Fans Another Thing to Argue About
- NCAA Needs to Get Off the Bench in DEI Fight
- Cuba’s Crisis Is an Opportunity for Its Neighbors
- Aviation’s Biggest Drama Plays Out on Tokyo Runway: Tim Culpan
- FAA’s Chronic Safety Woes Require a Serious Rethink: Editorial
- Demand for Pilots Runs Into Some Headwinds: Brooke Sutherland
- Want more Bloomberg Opinion? Terminal readers head to OPIN
. Or you can subscribe to our daily newsletter.