Boeing’s Crisis Mismanagement
The planemaker’s handling of disasters reveals a failure in leadership and a culture of concealment
On March 10th, 2019, a Boeing 737 MAX operated by Ethiopian Airlines took off from Addis Ababa en route to Nairobi. Many passengers on the flight, which included medics, academics, volunteers, and peacekeepers, were heading to Kenya to attend a session hosted by the UN Environment Assembly on finding innovative solutions for environmental challenges. During the conference, participants would address a wide array of challenges, from eradicating poverty to managing natural resources, waste, and food security.
They never made it. Two minutes after takeoff, the pilots reported a “flight control” problem to the control tower, and the plane’s flight control system was activated shortly after. Air traffic control granted permission to return to the airport and diverted other approaching flights. But the plane’s nose continued to dive. The pilots struggled to contend with a flight-control system that Boeing’s own employees had voiced concerns about years before the plane had even come to market.
Almost one year after the Ethiopian Airlines crash, Boeing is set to take the blame. In its probe of the incident, the House Transportation and Infrastructure Committee concluded that the 737 MAX’s design and development was “marred by technical design failures, lack of transparency with both regulators and customers, and efforts to obfuscate information about the operation of the aircraft.” But Boeing’s handling of the crisis has proven equally, if not more, harmful to the company’s prospects as the tragedies themselves.
Five months before the Ethiopian Airlines disaster, a Lion Air 737 MAX crashed into the Java Sea, also leaving no survivors. Lion Air’s poor safety record relative to other Indonesian airlines, alongside the country’s poor history of aviation incidents, were useful distractions from Boeing — Lion Air experienced 16 incidents in the period from 2000–18, in contrast with six for Air Asia and Garuda Indonesia combined. The planemaker did not immediately attribute itself blame, stating only “that the 737 MAX is as safe as any airplane that has ever flown the skies.”
Early reports of the crash indicated many parallels with the Ethiopian Airlines flight. The MAX’s anti-stalling system repeatedly forced the plane’s nose down,and the pilots struggled to regain control manually. Boeing also stated that the crash might have occurred from a recent replacement of one of the plane’s Angle of Attack (AOA) sensors. It argued that the pilots, who previously experienced issues around altitude and airspeed data, ultimately failed to follow standard procedure “due to erroneous AOA data.”
Boeing’s current expectation is that the 737 MAX, still grounded to this day, will be recertified and back in the air by mid-2020. But that timeline is being tested both by the FAA and select airlines like United, Southwest, and American Airlines, all of which have announced a revision in their schedules based on FAA guidance. The delay is owed to the lengthy process of finding a software fix to address the issues stemming from the Maneuvering Characteristics Augmentation System (MCAS) software.
The Lion Air and Ethiopian Airlines crashes revealed that several pilots had not received proper training, or were unaware that MCAS had even been added to the 737 MAX; from NPR:
Jason Goldberg, who flies for American Airlines and is a spokesman for its union, the Allied Pilots Association, disagrees that pilots got enough training to handle MCAS. […]
Goldberg says it’s true that pilots train to overcome pitch trim problems, so they can get the plane’s nose flying at the correct angle if the system goes haywire. But an MCAS malfunction on a Boeing 737 MAX creates a host of other problems, and they’re all distracting.
“You would have the stick shaker, which [activates] a rather violent aggressive shaking of the control column,” Goldberg says. “You would have the appearance of unreliable airspeed. You would have a number of warnings that don’t immediately or intuitively give the impression of a pitch trim problem.”
In spite of expressed reservations around the MCAS flight-control software and complaints by some pilots that they had not been given proper training, the 737 MAX continued to operate unabated. In the weeks after the Lion Air crash, Boeing doubled down on the logic for this. The company concluded that there had been “no process violation or non-compliance” in the jet’s certification by regulators.
The 737 MAX debacle set the stage for a five-hour Congressional hearing of Dennis Muilenburg, Boeing’s CEO and chairman, in October. Muilenburg, himself an engineer, repeatedly declined to answer questions around what legislative changes could be enacted to increase oversight of aircraft manufacturers by the Federal Aviation Administration (FAA). When asked by Senator Shelley Capito (R-West Virginia) if anyone in Boeing prescribed robust action after the crash of Lion Air Flight 610, Muilenburg replied that “if we knew everything back then that we know now, we would have made a different decision.”
It didn’t take much longer before other senators exclaimed that, in fact, Boeing knew a lot more than it let on. Members of the committee pointed to a series of texts between Mark Forkner, Boeing’s chief technical pilot who led the certification for the 737 MAX (and is now at Southwest Airlines), and Patrik Gustavsson, who went on to succeed him in that role; from Seattle Times:
In the Nov. 15, 2016, message exchange, Forkner tells Gustavsson that MCAS is now active down to Mach 0.2 — meaning at low speed, not just in the high-speed maneuver for which it was originally designed. He adds that it will now be necessary to update the description of the system, presumably referring to material Boeing provides the FAA.
“So I basically lied to the regulators (unknowingly),” he texted.
Another document released by DeFazio’s committee Friday is an email Forkner sent to an FAA official just over seven months earlier, on March 30, 2016, asking that MCAS be omitted from the pilot manuals and not mentioned in pilot training.
“Are you OK with us removing all reference to MCAS from the FCOM (Flight Crew Operating Manual) and the training as we discussed, as it’s completely transparent to the flight crew and only operates WAY outside of the normal operating envelope,” Forkner wrote.
Having convinced the FAA of that, Forkner then traveled the world talking to foreign regulators also working to certify the MAX. On Nov 3, 2016, he wrote an email to an FAA official, joking that he was “doing a bunch of traveling … jedi-mind tricking regulators into accepting the training that I got accepted by FAA.”
When prompted on this issue, Muilenburg only commented that Forkner no longer works at Boeing, and that he wouldn’t speak with the company. In addition to repudiating knowledge of the exchange and providing no tangible recommendations to improve the certification process, Muilenburg evaded questions about reports that Boeing had lobbied the U.S. government to allow the 737 MAX to continue flying. According to the Center for Responsive Politics, Boeing has spent more than $275 million on lobbying since 1998.
In the year since the crash of Ethiopian Air Flight 302, Boeing shares have plummeted over 50%. Initially, the company reassured investors that it expected the recertification of the 737 MAX in mere months, and later revised that timeline to January 2020. But the worldwide grounding of the MAX carried on in an effort driven largely by the victims’ families, many of whom testified on Capitol Hill in July.
Nadia Milleron and Michael Stumo, whose daughter Samya was on Flight 302, expressed little confidence in Boeing to carry out the recertification with safety top of mind. A lot of this is due to the initial reaction by the FAA, which only grounded the plan following action taken by other regulators worldwide. Considering a series of recent comments by Boeing leadership that former executives were frequently risk-seeking (or profit-maximizing), this comes as little surprise. Paul Njoroge, whose entire family died in the crash, stated for his part that “Boeing used the fallacy of foreign pilot error to avoid the grounding of the 737 MAX.” The company’s inclination to blame foreign pilots persists still to this day.
As it became clear that the MAX would fail to recertify in 2019, Boeing in December ousted its CEO Dennis Muilenburg in a measure the company argued would be necessary to reset expectations and restore public trust. Boeing replaced Muilenburg with David Calhoun, a long time Boeing insider, with the implausible hope that he would help reset the culture.
In an all-too candid interview with the New York Times, Calhoun claimed that Muilenburg boosted production rates at the expense of quality, adding that “if anybody ran over the rainbow for the pot of gold on stock, it would have been him.” But Calhoun does not seem to take responsibility for these decisions, despite having been in an optimal position to push back. In Boeing’s Q4 earnings call, Calhoun rebutted the claim that his long tenure and insider status gave him any say in the proceedings; from the Motley Fool:
I get a lot of media attention around the idea that I am somehow an insider. What if I changed that a little bit? What if I told you I simply had a front-row seat to everything you saw? And so all the things I read and see and hear, make no mistake, they all have an impact, they have an effect, and I get a front-row seat, and ultimately our Board took action as a result of it. And now I’m the one sitting in the operating seat.
Calhoun’s framing is that having been witness to poor decisions makes him the right person to steer Boeing out of its rut. This comes mere months after Calhoun claimed on CNBC that Muilenburg, from the board’s vantage point, “has done everything right from the beginning.” In effect, he is simultaneously claiming awareness of the mistakes made by Muilenburg, while taking no responsibility for them. Increasingly, Boeing’s mismanagement of the 737 MAX disasters looks to be symptomatic of a broader theme: a toxic culture and lack of self-introspection.
In December, days before Muilenburg’s ouster, Boeing confronted another crisis when, during a test flight, its CST-100 Starliner spacecraft failed to dock at the ISS (International Space Station). In what NASA declared a “high visibility close call,” Boeing’s spacecraft seemed to face two software errors: respectively, the Starliner captured the wrong “mission elapsed time,” grabbing data several hours off the correct time; and a software mapping error that would have caused thrusters to fire in the wrong way, an issue Boeing acknowledges might have been catastrophic.
Amid the 737 MAX crisis, investors looked to Boeing’s defense, space and security division to boost morale. It has become clear, however, that the company’s space initiatives are also suffering from neglect. In light of the recent mission failure, NASA launched an investigation which found 61 “corrective actions” were needed for the spacecraft, and it expects that it will take Boeing several months to address them all. Moving forward, there will be increased oversight not just around the company’s jet production, but in every aspect of the business.
Market trends have not been comforting either. The continued spread of Coronavirus (COVID-19) has dried up demand for new aircrafts, ending a 16-year surge in plane manufacturing that began after the eradication of SARS, a similar disease. Customers have shunned air travel, costing the American aerospace industry $175 billion in market value overall. This comes shortly after Boeing booked no new orders for its airplanes in the month of January, a first in almost sixty years.
While the grounding of the MAX is only one of many reasons for Boeing’s declining stock price, COVID-19 is proving to be a longer-term risk. A handful of airlines have collapsed in the past month alone, culminating in Flybe — which had previously been bailed out by the British government in January.
In response to these trends, Boeing stock fell by more than 18% on Wednesday, reaching levels not seen in three years and indicating the biggest single-day drop since 1974. Norwegian Air Shuttle, a low-cost airline, recently postponed the receipt of four 787 Dreamliners, posing a threat to a key source of revenue for Boeing. The airline had previously faced issues with the engine on its Dreamliner aircrafts in 2018, and was hit further by the continued grounding of the 737 MAX. As the Trump administration moved to restrict travel between Europe and the United States on Wednesday (with the exception of Ireland and the UK), expect more airlines and planemakers to feel the pinch.
Boeing and Airbus have long been dominant players in the airline manufacturing industry, making up 99% of global large plane orders. But Boeing’s failure in crisis management, alongside its toxic culture and lack of oversight into the company’s practices, are testing the limits of an already fragile duopoly.