Boeing’s 737-MAX has been grounded for the better part of a year with no end in sight. But with clearance out of their control, is the aircraft manufacturer helpless against mounting losses?
Boeing’s 737-MAX jets have a design flaw that has been a contributing factor in two fatal crashes. Some of the fault of the two crashes may be down to training or lack of emphasis but in at least the case of Ethiopian 302, the pilots correctly responded to the software and the aircraft still failed to stay in-flight.
Even since the worldwide grounding that followed the March 10th crash, still further problems have emerged. Among them, concerns about other product lines (the 787, delayed 777X launch), allegations that software solutions were outsourced to Indian engineers for less than $9/hour and lastly damning communication between executives which show knowledge that the problem existed well before sale.
Unlike other software solutions for consumer hardware, the 737 MAX solution seems to be much more hardwired into the aircraft. While it appears to be a 737-800 with new engines and some software upgrades, clearly if it was as simple as uninstalling the new upgrade and using 737-800 software which continues to fly every single day, they would have done so by now.
If adapting software used in other models is an unacceptable or unworkable option, a complete re-build shouldn’t be entirely necessary. It’s not as if the 737-800 software was completely different than other versions. Those builds utilized what was already known, working, and in-place with adaptations for new features without pretending the aircraft is unlike anything else.
If a brand new product is what was needed, how much longer would that solution take? It seems to be a rolling delay which would suggest it is close, but not here yet.
Who’s In Control
Boeing’s level of control is really limited at this point. Assuming they had a working solution already in testing, there are really a number of entities that control whether the airplane takes to the skies again.
Governments have to allow for the aircraft to fly in their airspace, they don’t move particularly fast and they don’t have any incentive to allow the MAX back over their country where harm could be done in their air and on the ground.
Airlines want to get the aircraft back in the sky, they have expansion and equipment replacement plans built around the plane. But they also have to get customers to ignore the issues and book without regard to the plane. Both airlines and customers have expressed serious concern that customers may revolt or book away from the MAX which would be devastating for the carriers.
Can the Problem Become Too Big?
American Airlines, which only had 24 Boeing-MAX aircraft in the fleet, hasn’t been able to use the type since April of this year. American Airlines CEO Doug Parker, never one to shy away from hyperbole, had concluded that more than $540 million in damage had been done to the carrier by the grounding of the aircraft. Trump Parker also stated that Boeing shareholders would pay for the wall damages. Maybe. But if so, I doubt it will be based on Parker’s estimations, they will have an awful lot of carriers with their hands out.
Boeing has already absorbed hundreds of millions in losses and last week fired the CEO of Commercial Airplanes, Kevin McAllister (it’s too serious for a Home Alone joke, but has no one noticed this?) If American Airlines has just 24 of the type and has attributed over $540MM in losses, how will the airline compensate owners of the other 413 already delivered and the stacked aircraft filling Renton and Boeing parking lots?
RyanAir has not been quiet about the strain the MAX grounding has put on the carrier, Norwegian has cancelled trans-Atlantic routes featuring the aircraft.
Using Parker’s math (a dangerous proposition, I know), Boeing Shareholders would be on the hook for $9.832 bn in damages for the grounding. While Boeing is a much larger company than a $9.832 bn loss burying the carrier, the free cashflow drain would be a difficult constriction to bear (even if they spaced out payments.) More orders have been cancelled in 2019 than added, and it’s not just the MAX. With a delayed rollout of the 777X now until 2021, it’s clear that they have more to prove than folding wing tips; 787 orders have also been dropped.
At what point does Boeing’s handling of the 737 MAX issue become too much? At what point do customers who always turned to Boeing in the past for safety and stability now turn elsewhere?
I’m not sure that exposure from the 737 MAX failures alone can bury the airline manufacturer and I hope it doesn’t, the world is a better place with Boeing around – they are an American institution. However, the bleed over from this issue to other product lines has already started and customers are aware of what plane they are flying on for the first time, perhaps, ever. Boeing needs to dramatically turn this issue around, work with regulators and governments to ensure that this isn’t the iceberg that takes down an unsinkable ship.
What do you think? Is the problem getting too big for Boeing to mitigate? Will customers trust other Boeing aircraft? How do you feel about the manufacturer’s ability to produce a safe aircraft?