The aircraft manufacturer Boeing is plunging ever deeper into its self-made crisis. Now there is even a risk of losing business to competitor Airbus. After a life-threatening hole in a Boeing 737 MAX 9 and allegations of poor cooperation in the subsequent investigation, the approvals of new aircraft variants 737 MAX 7 and 737 MAX 10 are being delayed. The US aviation authority FAA has to take a closer look and is no longer as liberal in awarding contracts Exceptions or waving through self-certifications like before.
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The model customer for the Boeing 737 MAX 10 was supposed to be United Airlines, one of the largest airlines in the world. To unveil the 737 MAX 10 in June 2017, United ordered a hundred of the aircraft, which should go into service by the end of 2020. United later increased the order to 277 aircraft with an option for an additional 200. The 737 MAX 10 will be about 1.7 meters longer than the 737 MAX 9 and will be able to carry 230 passengers, ten more. However, Boeing has not yet been able to obtain an operating license for the 737 MAX 10; The same applies to the smaller variant 737 MAX 7.
After the hole in the 737 MAX 9, the FAA (Federal Aviation Administration) checked parts of ongoing production at Boeing and one of over 600 suppliers, the former subsidiary Spirit Aerosystems. The result is devastating. Of 89 audits, Boeing failed 33, with a total of 97 safety violations. Spirit was only able to pass six of 13 tests. Boeing also had to admit that no new Boeing models would be launched any time soon.
United is looking at Airbus, Southwest is cutting its flight schedule
On Tuesday, both United Airlines and Boeing's long-term customer Southwest Airlines had to go public: “We asked Boeing to stop building MAX 10, which they did, and start with MAX 9,” said United CEO Scott Kirby, “It is impossible to say when the MAX 10 will be approved.” But even United's replacement order of MAX 9 Boeing is not sure: “We are interested in Airbus 321, and if we get a deal that works economically, we will do something,” he told stock market analysts, “If not, then not, and we will have more MAX 9.” United stopped hiring new pilots last week.
Southwest says in a recent stock market filing Tuesday that the 21 expected 737 MAX 7s will not arrive this year. Worse still: Boeing cannot honor the contracts for the 737 MAX 8, which has been delivered since 2017. Instead of 58 of these aircraft, Southwest will only receive 46 this year. This means that the large US airline, which buys exclusively from Boeing, is missing 42 percent of the fleet additions planned for 2024. This forces cuts to the flight schedule. Southwest fell around 15 percent on the New York Stock Exchange on Tuesday, Boeing four percent, United around two percent.
For comparison: Delta Airlines shares rose slightly on Tuesday. This company revealed to Bloomberg that it doesn't expect 737 MAX 10 until 2027. United boss Kirby was even “glad” about the additional delay. Because Boeing is finally taking time to address the quality deficiencies. “This isn't a 12-month issue, this is a two-decade issue,” says Kirby. “I'd rather Boeing do what they have to do, and they're doing it now.”
Outsourcing and billions for own shares
In fact, it has been about two decades since Harry Stonecipher was CEO of Boeing. He was President and Chief Operating Officer there from 1997 – and is proud of having turned around the corporate culture at Boeing: “When people say I changed Boeing's culture – that was the goal, so that it runs like a business instead of a great one technology company.”
Offloading was his credo, better known as outsourcing. Boeing continued to withdraw from both development and manufacturing. As early as 2001, Boeing engineer John Hart-Smith warned of the risk of the outsourcing strategy in an internal white paper. Stonecipher didn't mind that because he was able to improve the finances in the short term. Since he took office as Boeing president, the company has spent more than $60 billion buying its own shares. This supports the share price, which is certainly damaging to management, but the money is then missing elsewhere, such as quality assurance or the development of a new generation of aircraft. Instead, Boeing has focused on making the old 737 ever longer.
According to Econlife, today a Boeing 737 MAX has more than 600 suppliers, who in turn commission hundreds of subcontractors. With so many suppliers and their suppliers all over the world, quality control becomes a herculean task. Boeing even buys the fuselage of the aircraft externally, from Spirit Aerosystems, which emerged from a former Boeing department. Only now is Boeing thinking aloud about reincorporating Spirit Aerosystems.
Boeing's response to crashes: lobbying
The crashes of two 737 Max 8 series aircraft in October 2018 and March 2019 led to hundreds of dead passengers and lip service from Boeing, but apparently no comprehensive rethinking. Two safety measures could prevent further disasters of the same kind: the installation of another sensor and a switch that can temporarily stop intentional but confusing shaking of the control stick.
But Boeing didn't want to pay for that and instead invested in interventions with US politicians. With success: The safety measures for the Boeing 737 MAX were postponed by law. Boeing only has to make these improvements three years after the type approval of the 737 MAX 10. And when this approval will come, no one knows. Boeing avoided a criminal trial by paying billions.
“The Boeing problem will not be solved until there are real consequences for top managers and board members personally,” the Seattle Times took issue with the company two months ago. Boeing was founded in Seattle in 1916 and continues to assemble aircraft there from supplied parts to this day. “A return to a culture of technical excellence and a reduction in the outsourcing model may be too much to ask of a company so committed to this business model. But it must happen or there will be more fatal incidents.”
Dead whistleblower
This week, another death brings to mind serious allegations against Boeing: whistleblower John Barnett was found dead with a gunshot wound on Saturday. The police assume it was self-inflicted.
Barnett worked for the company for almost three decades until he retired in 2017. From 2010, the man worked at the Boeing factory in Charleston, South Carolina, in quality assurance for Boeing 787 “Dreamliner” aircraft. In 2017, he filed a complaint against Boeing. He said he had reported several safety-related problems, such as suspected defective parts being installed or one in four oxygen masks malfunctioning.
“I have yet to see a plane leave Charleston that I would vouch for with my name to say that it was safe and fit to fly,” Barnett told the New York Times in 2019. Boeing's management failed to take appropriate action despite repeated reports. Instead, he, Barnett, was isolated and treated poorly.
Boeing denies both the allegations of labor misconduct and the allegations of unsafe Boeing 787s. The employment law trial is scheduled for June. Barnett was interviewed in Charleston on Thursday and Friday in preparation for his trial. The 62-year-old was scheduled to testify further on Saturday.
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