Boeing’s Rise, Fall and Painful Public Reckoning

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Tires and doors falling off mid-flight. A top US official stranded because of a 737 jet maintenance issue. Boeing is facing the ire of US lawmakers, scrutiny from its key regulator, and pressure from Wall Street ahead of an earnings report — all as it struggles to rebuild trust with passengers after a string of crises.On today’s Big Take DC, Saleha Mohsin digs into Boeing’s rise and fall with reporter Julie Johnsson, global aviation editor Benedikt Kammel, and long-time pilot and accident investigator Captain John Cox.

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Here is a lightly edited transcript of the conversation:

Saleha Mohsin: Yesterday, two different Senate committees convened to bring the country’s biggest planemaker… down to earth.

Richard Blumenthal: Boeing is at a moment of reckoning. It's a moment many years in the making.

Mohsin: That’s Senator Richard Blumenthal, who chairs one of those subcommittees. Boeing, he reminded the public, had promised to make big changes after a series of tragic accidents over five years ago.

Blumenthal: that led Boeing to promise that it would overhaul its safety practices and culture. That promise proved empty.

Mohsin: Whistleblowers and critics from inside Boeing are now saying the company has ignored employees who’ve highlighted shortcuts in the manufacturing process.

It’s quite the fall from grace for a company that was long known as a trusted planemaker.

Benedikt Kammel: People always felt this is the safest plane. You know, there's that saying, if it's not Boeing, I'm not going. Now it’s sort of turned into, well, if it's Boeing, then I'm not going.

Mohsin: Benedikt Kammel oversees Bloomberg’s global aviation coverage.

Kammel: And for the past three months, it's turned into the everything Boeing beat.

Mohsin: Because Boeing has serious problems on its hands. From doors and tires falling off aircraft mid-flight, to the US Secretary of State getting stranded overseas.

Department of State Daily Press Briefing: He was scheduled to fly back from Zurich. Um, there's a mechanical issue with his plane…

Kammel: These incidents happen all the time. In the way that a car can break down, a plane can break down. The problem for Boeing is that it adds to that narrative that Boeing is producing planes that can no longer be trusted.

Mohsin: And trouble at Boeing ripples through the entire airline industry, as Senator Ron Johnson pointed out at yesterday’s hearing.

Ron Johnson: In the end, I want the public to be confident in getting on an airplane and, and, uh, experiencing air travel. But I have to admit, this testimony is more than troubling.

Mohsin: Today on the show: how did Boeing get here? And what can the company—and the US government—do to turn things around and make flying feel safe?

Kammel: If there's one company that's too big to fail, it's Boeing. They make the presidential jet. They are an integral part of the US economy. They're the biggest exporter in the country. There's nobody suggesting that Boeing is going to go out of business.

Mohsin: But the road ahead… is sure to be turbulent.

From Bloomberg’s Washington bureau, this is the Big Take DC podcast. I’m Saleha Mohsin.

To understand just how remarkable this moment is—with Boeing’s problems being dragged in front of Congress—you have to remember: this is a company that, for more than a century, had a reputation that centered on safety and reliability.

Julie Johnsson: the phrase that keeps coming to mind is the great unraveling.

Mohsin: Bloomberg’s lead Boeing reporter, Julie Johnsson has been watching that unraveling. It’s a story that starts back around 2010.

Johnsson: Just for context, Boeing was cranking out enormous amounts of cash, it was just really, really riding high.

Mohsin: It was the go-to carrier for the US government—from the postal service to Air Force One. And its 737 jets, which were first introduced in the ‘60s, were the aircraft of choice for commercial airlines.

John Cox: Being a professional pilot, the absolutely most important part of it is the safe operation of the aircraft.

Mohsin: Captain John Cox spent thirty years as a commercial and corporate pilot. And for many of those years, he flew Boeing jets… including the 737.

Cox: And I really enjoyed the airplane. It's what pilots call an honest airplane. It does things the same way every time. Very reliable. It's a workhorse. It was a good challenging weather, uh, airplane, meaning high cross winds or low visibility. So my time with the 737 was one of the high points of my career.

Mohsin: In 2010, Boeing’s main competitor, Airbus, upgraded a line of its planes with new engines that left the 737 looking dusty and outdated.

Johnsson: Airbus got a big jump on the market and Boeing decided they had to do something. And that's where the 737 MAX was brought to life pretty quickly.

Mohsin: The 737 MAX, Boeing’s next iteration of the beloved series, came out in late 2011. But it would end up spelling disaster.

Johnsson: This is just like every fable, you know, you've ever heard over history, this company brought to its knees, through a series of, of terrible tragedies.

Mohsin: In October 2018, a Boeing 737 MAX plane took off in Indonesia. Just 13 minutes into the flight:

Bloomberg TV: the issue was a system that forces the nose of the plane down. It's supposed to be a safety feature, but it resulted in obviously that tragic crash...

Mohsin: No one on board survived. Boeing assured the public, and its regulator—the Federal Aviation Administration—that the plane model wasn’t at fault.

But then, just five months later… another 737 MAX crashed. This one, taking off from Ethiopia.

Bloomberg TV: the Ethiopia crash that killed 157 people...

Kammel: And the fallout from that was swift and brutal for the company, obviously far, far more brutal for the people involved in these crashes. But on the corporate side, it was sort of a reckoning for Boeing and its products, which previously had a stellar record.

Johnsson: the company's biggest source of revenue was grounded globally after the second crash. And that's when people started, really questioning Boeing's processes, and whether the company's priorities had drifted over time.

Kammel: The thinking that this is a company that actually has not put safety first. It's a company that's put profit first. It's been caught up in the competition with Airbus. And all of these things led to a toxic cocktail that ultimately led to them producing planes that weren't properly built, certified, and had the errors that contributed to the crashes.

Mohsin: All 737 MAX planes were pulled from runways. And Dennis Muilenburg, Boeing’s CEO at the time, was brought in front of Congress.

Johnsson: He was really flogged by both parties publicly over, you know, a couple of days of hearings. And, within a couple of months was forced out by the board.

Mohsin: Then, a new CEO, Dave Calhoun, came in with a fresh mandate:

Kammel: to clean the company up to put safety first. That was a thinking that indeed they had cut some corners that they had been too quick with the way that they produce some of these planes and that the company felt, uh, we need to sort of rethink how we do things, slow things down.

Johnsson: So, Calhoun steps into the job in January 2020 and then COVID happens.

Mohsin: Suddenly, nobody’s really flying. On any planes, not just Boeing’s.

Kammel: And in some ways that was a chance for Boeing because this took a lot of the pressure off the business and the company. And it gave them the time to rethink, to reset, to revisit, uh, their aircraft and their operations.

Johnsson: Boeing was still not making a profit. But was gradually starting to head in the right direction as they try to get their factories and their supply chain figured out, post COVID and, you know, win back trust of their customers and regulators. And, the narrative seemed to be changing.

Kammel: There was this expectation that now would be the year where Boeing would truly come back. Everyone thought, 2024, they've left all the baggage behind, they've left the previous crises behind, you know, orders were pumping, they were really winning, amazing business all around the world. And then January 5th happened.

Mohsin: January 5, 2024.

Johnsson: A 737 MAX, you know, takes off out of Portland, and a few minutes into the flight, there's just this enormous bang, and a panel flies out of the plane.

Bloomberg TV: This is a fortified door that is normally locked. So for that to sort of burst open, gives you a sense of what could have gone horribly wrong…

Mohsin: Turns out, there was a mishap at the factory. Some Boeing employees had been fixing an error with a door panel…

Kammel: And then the panel was put back in. What didn't happen, the four bolts that should have kept it in place were just not put back in. Somebody clumsily left those bolts lying around somewhere on the factory floor. They're probably in a trash can at this point.

Mohsin: Here’s what Boeing said in a recent statement to Bloomberg News: “Since 2020, Boeing has taken important steps to foster a safety culture that empowers and encourages all employees to raise their voice. We know we have more work to do and we are taking action across our company… We continue to put safety and quality above all else and share information transparently with our regulator, customers and other stakeholders.”

As for that January door incident, Boeing’s CFO addressed it head-on at ​​the Bank of America Global Industrials Conference last month:

Brian West - Bank of America Global Industrials Conference: Let me first start by saying that we continue to be fully committed to transparency and accountability with our regulators. The FAA is deeply involved and undertaking a tougher audit than anything we've ever been through before. And as they do their important work, we're undertaking comprehensive actions, so that we can move forward to strengthen quality and build confidence.

Johnsson: Fortunately nobody was killed. I mean, it's just like, unbelievably miraculous that nobody was sitting next to the section that failed. But, that moment flashed around the globe. And in videos that just went viral within a matter of minutes, and um, I was watching it happen. But the confidence that Boeing had been trying to rebuild just collapsed, within minutes.

Mohsin: Captain Cox, the pilot we heard from earlier, has investigated crashes with the National Transportation Safety Board. He says, when he first heard about Boeing’s tragic crashes in 2018 and 2019, his sense of how they could have happened was blurry.

Cox: I've been an accident investigator for 35 years. And when you look at those accidents, they're some of the more complex ones I've ever seen.

Mohsin: But as he’s followed the news about Boeing’s 737 jets over the past few months and years, he says, a different image has come into focus. He runs an aviation safety consultancy and says, it’s all left him more than surprised.

Cox: I think shocked would be a better word. It was very disappointing to me as we began to understand the contributing factors for the MAX accidents of how the culture at Boeing had changed from when I was working very closely with them in the 80s and 90s. The focus really shifted from building the highest quality airplane that they could to, shareholder value.

Johnsson: The 2019 tragedies, we knew, okay, there were a series of things that went wrong, but at the root was this flawed design. But when you don't have confidence in a company's, you know, ability to install literal nuts and bolts in its aircraft, I think that's far more damaging.

Mohsin: Coming up… where does Boeing go from here? And will the US government’s intervention help move the needle?

After Boeing’s plane door incident in January, the FAA came down on the company… hard.

Kammel: I think for the FAA, this is a moment of reckoning where they've understood we need to be much tougher on this company. We need to keep a much closer eye on what they do. We need to slow them down.

Mohsin: The regulator convened an expert panel to investigate safety practices at Boeing. And the results it published in February… were pretty damning.

Kammel: They said there was a disconnect between sort of the message from the top, uh, about safety culture and what actually arrived down on the shop floor. There was a sense that profitability was taking precedent over process.

Mohsin: I'm trying to think how we got here. Isn't it up to the U. S. government or the Federal Aviation Authority to make sure that this doesn't happen in the first place?

Kammel: Part of the accusation leveled against the FAA, after these two crashes, was that they had too cozy a relationship with Boeing. That, they let Boeing almost self regulate and they put too much faith and too much trust in Boeing. And we all know how that ended.

Mohsin: It’s worth noting that Boeing has over 100 lobbyists on its payroll—it spent over $14 million on lobbying in 2023.

Now, the government is sending examiners into Boeing’s factories. It’s forcing them to slow things down—mandating that the company limit the number of planes it produces each month.

It gave the company until late May to address the issues the FAA audit identified.

At one of yesterdays’ hearings, Senator Tammy Duckworth put it this way:

Tammy Duckworth: We need to judge Boeing by what it does, not by what it says it's doing.

Mohsin: Because Boeing’s problems are the government’s problems.

Boeing isn’t a company that can just be replaced. It’s America’s flagship aircraft maker—providing planes for everyday people to fly on, and also supporting US defense and military operations.

Plus, there are only two major players in the airplane production industry. The government can’t just ditch Boeing and replace its fleet with Airbus. Neither can commercial airlines.

Johnsson: If you go to Airbus, you're joining the back of the queue, a queue that stretches into the 2030s. Airbus is basically sold out through 2029. And the airlines need airplanes right now.

Mohsin: Benedikt told me, he’s spoken with Airbus executives about all this. And they don’t view Boeing’s problems as a win for them.

Kammel: They say, ‘look, we take no pleasure in the other side's misfortunes here, because we know, whatever happens to one side could as easily happen to the other side.’ And frankly, this is bad for the global aviation industry. People have second thoughts about flying, but it also means that, if Boeing slows down, it sends a shiver through the entire industry.

Mohsin: Benedikt says it’s a problem of supply and demand. Fewer planes overall mean airlines have to limit their flights, and the routes they serve. And that would mean demand outpaces supply.

Kammel: So the fewer seats, as it were, that means higher prices. So all these things are ripple effects that go from the factory floor at Boeing all the way back, to the pockets of the consumer.

Mohsin: If you ask Captain John Cox, we should keep things in perspective.

Cox: If you look at in 2023, worldwide, we flew about 35 million flights without a single accident or a single fatality. It's one of the safest years in aviation's history.

Mohsin: That’s encouraging to him… even though, clearly, doors shouldn’t be falling off planes mid-flight.

Cox: I think day by day, we'll begin to rebuild the confidence in the quality of the airplanes coming off the Boeing assembly line. I'm comfortable with them today. I'll fly on a MAX without a second thought.

Mohsin: But right now, Boeing is still managing a bumpy landing.

On Wednesday, the company will report its earnings from the first quarter of 2024… and things are not looking good.

Johnsson: they've burned through just an enormous amount of cash, I mean, they've had to pay hundreds of millions of dollars to the airlines whose planes were grounded. Slowing your factories, taking days off to, encourage employees to, speak up about, you know, what they've seen. All of that adds up. So it's going to be a big cash outflow.

Mohsin: Investors are expecting the company to report burning through $4 to $4.5 billion in cash for the first quarter.

Johnsson: So at some point, they need to start ramping up their production again but they can't do that until the FAA is convinced that their processes have changed.

Mohsin: If Boeing wants to rebuild trust, it’s going to need a new plane. Consumers do not trust the 737 MAX anymore.

Johnsson: Boeing planes right now, are like just one giant bad meme.

Mohsin: But new planes cost money. Money that Boeing does not have.

All this leaves Boeing in a spot not unlike the one it found itself in in 2019. Crisis management mode.

A few days after that plane door flew off this past January, Dave Calhoun, the CEO who took over during the last crisis, addressed the company’s employees and told them: we’re taking responsibility for this. Something needs to change.

Kammel: Dave Calhoun, held a, almost tearful speech to employees saying, look, I get this. We need to get this right.

Dave Calhoun: I’ve got kids, I’ve got grandkids, and so do you. This stuff matters.

Kammel: This is a watershed moment for the company. Safety is our guiding principle, always has been, but if anyone didn't get the message, this is our north star.

Mohsin: The last thing I wanted to ask you, Benedikt, is where does Boeing go from here?

Kammel: Well, Boeing wherever they go, they're going to go with a new CEO. So a couple of weeks ago, they announced a leadership change that was fairly comprehensive. The chairman stepped down, the head of the aircraft manufacturing business stepped down. And Dave Calhoun, who had taken the role in the wake of these twin crashes, also said that he would leave. And a lot of people are saying Boeing needs an engineering mind again. You know, forget the person with a financially minded sort of, uh, perspective. We've had those before and that didn't get us anywhere.

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