Boeing’s mid-flight drama is a severe blow to a troubled company

On Friday, passengers on Alaska Airlines flight 1282 were subjected to the terrifying ordeal of watching a piece of the 737 Max 9 aircraft they were on tear away, leaving a gaping hole in its place. It turns out that a panel covering an unused emergency exit had fallen away while the aircraft was flying at about 16,000ft. Amazingly, no one was sitting beside that door, so there were no casualties. But a child nearby is reported to have had his shirt sucked off as the aircraft lost pressure. It could have been much worse.

The exact cause of the accident is not likely to be known before safety inspectors complete their investigation. But whether they find this is the fault of a supplier, Boeing or neither, it is a severe blow to the US aerospace and defence company’s reputation at a time when it appears to be staggering from one incident to another. This raises questions over whether the company has really overcome the quality and production issues revealed after the fatal crashes of the 737 Max 8 in 2018 and 2019.

Last April, Boeing announced that its supplier, and former subsidiary, Spirit AeroSystems, had improperly installed two fittings on the fuselage of certain models of the 737 Max, delaying deliveries. In August, it revealed that Spirit had incorrectly drilled holes in the rear of the aircraft fuselages, incurring further delays. And in December, it asked inspectors to look for loose bolts that might be rattling around rudder control systems.

At the same time Boeing was asking the US Federal Aviation Administration to exempt its newest 737 variant, the smallest Max 7, from certain safety standards on anti-icing systems until May 2026 to allow it to begin delivery. Boeing insists the fix will be installed across the fleet. But even if this is not a critical safety issue, it is not a good look for a company with Boeing’s recent history to be asking for exemptions to safety criteria so it can rush an aircraft out the factory doors.

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Many in the industry believe an exaggerated focus on financials and shareholder returns at the expense of engineering expertise led to the Max 8 disaster. Chief executive Dave Calhoun was part of the team that led that strategy, as a board director since 2009. He has been paid $65 million in total compensation and incentives since he took charge in 2020, promising to stabilise the company, return the Max to flight, improve the engineering culture and win back investor and customer confidence.

On the plus side, the Max has been recertified. And before Friday’s incident on an aircraft made on Calhoun’s watch, Boeing’s shares even seemed to be advancing on hopes of improving deliveries – though they were still trading below where they were when he took over. Yet it is difficult to see what else has been achieved in four years, while rival Airbus powers ahead. On almost all of its products – in both the civil and defence sides of the business – Boeing has encountered delays, cost overruns and production issues.

Meanwhile, many of the decisions taken suggest that the culture at the top has not changed to the degree needed. Calhoun has refused to consider investing any time soon in a new aircraft to take on Airbus’s popular A321. He also seems to have signalled a preference for lobbying over engineering by moving headquarters to Arlington, Virginia, close to Washington DC and the Pentagon. More recently he abolished Boeing’s corporate strategy function, leaving it instead to individual divisions. As Richard Aboulafia of AeroDynamic Advisory points out: “A strategy department allocates scarce capital among the demands of competing business units (who always want more than their fair share).” And resources are indeed scarce, with Nick Cunningham of Agency Partners estimating net debt of $38.9 billion.

Finally, the recent appointment of Stephanie Pope, former head of Boeing Global Services, as COO brought speculation that the 66-year-old Calhoun is preparing his succession. Most of Pope’s career, however, has been as a financial officer. What the company really needs now is not another leader who may be focused on cost-cutting but one with the gumption to take a risk on a new future for Boeing.

This will require a deep understanding of and commitment to the complex high value-added manufacturing business that it is, internally and across the supply chain – crucial to any culture focused on safety. It also needs a bold commercial strategy to engage engineers and claw back share from Airbus. Because even if these recent incidents are eventually blamed on suppliers, passengers won’t care. If the safety of Boeing’s aircraft is in question, Boeing, and ultimately its CEO, will carry the can. – Copyright The Financial Times Limited 2024