Boeing, a prominent player in the aviation industry, has recently been under scrutiny due to a series of airplane malfunctions. Quality lapses at Boeing have been exposed following an accident on an Alaska Airlines flight on January 5th where the door plug was ejected from the airplane. The impact of this incident and many other reported quality issues has led to FAA audits, a DOJ investigation and temporary groundings of several Boeing 737 planes.
Boeing's current challenges are not unprecedented but part of an ongoing issue spanning several years. Boeing needs a significant shift in culture, prioritizing engineering over profits. Boeing's recent problems have not only affected its delivery schedules but also its reputation in the industry.
The shortage of single-aisle jets are also impacting the passengers. The shortage primarily affects planes that are used for short to midrange distances, like the Boeing 737 and Airbus A320-family, and constitute the majority of the global fleet. Domestic and regional flights are more affected and have lead to fewer flight options and higher prices.
This year, Boeing stock was at $249 a share before the door plug failure in January. As of now, it stands at $181, off 27% in 2024, making it the second worst-performing stock in the S&P 500 this year.
Boeings Mechanical Issues
Boeing's production standards have been under scrutiny for some time. Allegations have been made about the rush to build planes as quickly as possible to maximize profits leading to unsafe practices, including the deliberate fitting of substandard parts to planes on the production line.
Five years ago, Boeing faced one of the biggest scandals in its history when two brand new 737 Max planes were lost in almost identical accidents that cost 346 lives. Both crashes were caused by a relatively unknown piece of software, the Maneuvering Characteristics Augmentation System (MCAS). Leaked documents and congressional hearings revealed that Boeing’s leadership knew that MCAS could cause crashes by forcing a plane into a nosedive, overriding pilot control.
In 2024, the Federal Aviation Administration (FAA) conducted a six-week audit of Boeing's 737 MAX manufacturing processes and found multiple instances of quality control issues. The audit was initiated after a door plug flew off a 737 MAX 9 at 16,000 feet. Boeing failed 33 out of 89 product audits, with a total of 97 counts of alleged noncompliance. Further evidence of production problems emerged when the FAA warned that improperly installed wiring bundles on 737 Max planes could become damaged, leading to controls on the wings deploying unexpectedly and causing the aircraft to roll. If not addressed, this could result in loss of control of the airplane. Hundreds of planes already in service will have to be checked as a result.
The FAA announced a temporary grounding of certain Boeing 737 Max 9 aircraft operated by U.S. airlines due to various malfunctioning incidents. This includes incidents such as emergency landings due to parts of the fuselage ripping off, cockpit windows cracking, possible oxygen leaks, engine failures, and even a wheel loss during an attempted takeoff. As well, Boeing's challenges have also led to a criminal investigation by the US Justice Department into the January accident.
Airlines Affected
The ongoing crisis at Boeing is now causing problems for airlines. US carrier Southwest plans to cut its capacity this year because it can't get hold of the planes it needs. Southwest Airlines does not anticipate receiving any of its long-awaited 737 Max 7 aircraft this year. Instead, deliveries of other Boeing models will total only 46 units, a significant decrease from the previously expected 79. This has led Southwest to revise its fleet plan, which was already adjusted last year due to earlier delivery delays. The airline also plans to reduce capacity by at least one percentage point in 2024 compared to 2023 due to the fluid aircraft delivery schedule.
In Europe, Ryanair recently revised its annual passenger forecast downwards due to receiving only 40 Boeing planes instead of the originally anticipated 57. This will result in a slimmer summer schedule and 5 million fewer passengers this year. The carrier plans to raise prices by around 10% and cut back on services from Dublin, Milan, and Warsaw. An Irish discount carrier
Alaska Airlines, which experienced an accident with a Boeing 737 Max 9 in January, has also expressed uncertainty about its capacity outlook due to unpredictable aircraft deliveries. The incident in January, which led to a temporary grounding of all Max 9s, resulted in a $150 million reduction in Alaska Air's profits.
Some carriers may try to obtain Airbus models to replace the lost Boeings, but a wholesale transfer of orders from the American manufacturer to the European is simply impractical due to full order books.
In response to these issues, top executives across the airline industry have urged Boeing to address its problems urgently. However, with only two main players in the industry - Boeing and its rival Airbus - finding a quick solution to the aircraft shortage is proving difficult. Airbus's order book is already stretched well into the next decade, making it hard for airlines to fill the gaps left by Boeing's delivery delays.
Whistle Blower
The death of John “Mitch” Barnett, a former Boeing employee and whistleblower, has raised questions about the company's practices. Barnett was in the middle of a deposition against Boeing at the time of his death, alleging harassment and forced early retirement due to his concerns about the safety of Boeing’s 787 Dreamliner commercial aircraft. His lawyers and family friends have questioned the ruling of his death as a suicide.
Barnett had previously spoken out about Boeing's dangerous and negligent practices after leaving the company in 2017. He described how Boeing compromised quality control in a manner that was "catastrophic" for passengers on Boeing planes. He also exposed the role of Boeing’s military connections, inherited from its merger with McDonnell Douglas in 1997.
Boeings Significance
Boeing plays a significant role in the American economy and the US military-industrial complex. It is one of the country’s largest manufacturers and exporters, and is a key supplier of the vast sums of war material purchased by the US government. Despite the controversies and safety concerns, Boeing remains in business, protected by federal regulators and politicians who design laws allowing the production of complex aircraft with essentially no oversight.
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