What is wrong with Boeing?

Once the pride of American aviation, Boeing keeps making headlines for all the wrong reasons. Yet another issue with the 737 Max jet has surfaced, this time due to misdrilled holes. This adds to the growing questions about the quality of Boeing's equipment. The company is currently in crisis, facing challenges on multiple fronts, including safety concerns and management culture. It has become a classic case of late-stage capitalism, struggling to maintain its once prestigious brand identity. The ongoing issues at Boeing could make air travel even more of an ordeal than it already is. Travelers are not necessarily facing a pricing crunch like last year, but rather a massive travel nightmare due to limited slack in the system. When flying, customers can choose from various carriers, but the actual planes are primarily from Boeing or Airbus, creating a duopoly. The production and support of these commercial aircraft are hugely expensive, with experts estimating that developing a new plane from scratch can cost upwards of $20 billion. New entrants in the field often disappear due to these high barriers to entry. The Chinese have tried to develop narrow-body planes to compete with Boeing and Airbus, but these jets have not been certified in the US or Europe and are unlikely to be anytime soon. Despite being the only game in town, Boeing faced a significant setback with two tragic accidents involving the 737 Max. Over five months in 2018 and 2019, two 737 Max Eights crashed, killing 346 people. In both cases, a piece of software called MCAS, developed by Boeing, was at fault and overwhelmed the pilots' ability to control the planes.

Boeing tried to catch up to Airbus, which already had a more fuel-efficient narrow-body on the market. Instead of developing a new design, Boeing modified the existing one to fit new engines, leading to the installation of MCAS to guard against potential stalls. However, Boeing did not fully disclose or train pilots on this software, and most aviators learned about it only after the Lion Air crash in 2018. The 737 Max was grounded for 20 months while Boeing developed new software that wouldn't overwhelm pilots. The two crashes and subsequent fallout revealed how much Boeing had strayed from prioritizing flight safety in favor of profits. This shift began in the late 1990s when Boeing purchased McDonnell Douglas, a company known for putting stockholders first. A series of CEOs gradually moved Boeing's focus towards stockholder returns, and from 2013 to 2018, Boeing spent $41.5 billion on stock buybacks, benefiting investors and managers. In response to the backlash, Boeing's CEO stepped down and was replaced by Dave Calhoun. Under Calhoun's guidance, Boeing managed to get the 737 Max back in the air. However, issues persisted, such as a door plug blowing off a 737 Max Nine plane due to bolts not being secured properly. The FAA found multiple incidents where quality control procedures were not followed and took the unprecedented step of limiting Boeing's production rate until it could prove it could operate safely and responsibly. The FAA's restrictions on 737 Max production come at a time when Boeing has an order backlog of almost 5,000 planes, affecting summer vacation travel. Airlines like Southwest, which expected almost 80 Max deliveries this year, are now only receiving 20. This shortage is forcing some airlines to keep older planes in service longer, leading to maintenance issues. Additionally, hundreds of Airbus jets are being pulled from service due to a recall for an engine made by Pratt and Whitney, compounding the supply problem.

Despite these challenges, there is a silver lining. Calhoun says Boeing is now a different company, and travellers have more confidence in airline safety. Summer airfares may not necessarily go up if you can get a seat, and in some cases, fares may be down from the previous year. However, with fewer seats available and less capacity to absorb delays, travellers might face longer waits and more disruptions.

Boeing's troubles make it the scapegoat for summer travel woes, and as its issues linger, it is falling behind Airbus. Before COVID-19, Boeing was about twice as big as Airbus, but now its market cap is around $12 billion smaller. Boeing is taking steps to address these issues, and there may come a time when people look back and see this as a pivotal moment in the company's history. Boeing CEO Dave Calhoun has announced he will step down by the end of the year, leaving questions about who will take over. Despite the hardships, writing Boeing off completely could be shortsighted, as the company is arguably too big to fail. The US government is unlikely to allow a situation where there is no domestic supplier of commercial aeroplanes, given Boeing's essential role in both commercial aviation and the military. Everyone is invested in Boeing getting this right.