As Boeing’s Woes Pile Up, Experts Wonder If Its Brand Is in Descent
In the months since two Boeing 737 MAX flights crashed, killing a combined 346 people aboard, the brand that helped launch the Jet Age has found itself in a tailspin.
As its newest airplane sits grounded worldwide, Boeing, working alongside regulators, is trying to assure everyone from passengers to pilots that the plane is safe to take flight once more. But during a process that has taken months longer than the company anticipated, the Chicago-based aerospace company has drawn blistering criticism from domestic and international regulators, airlines, commercial pilots, and industry analysts. And now, it appears, accountability is coming to the C-suite.
Boeing confirmed Tuesday the unexpected exit of the president and CEO of its commercial airplanes division, Kevin McAllister. No reason was given for McAllister’s departure, but there had been has internal discontent with McAllister’s handling of the MAX crisis since its grounding, according to a New York Times report earlier this month.
“The reaction I keep hearing today is ‘How can they throw Kevin under the bus?'” an analyst who tracks Boeing tells Fortune. The news came the day after an already-scheduled Boeing board of directors meeting in San Antonio.
Given his short tenure at Boeing, McAllister is a poor scapegoat for the MAX crisis. The former General Electric executive joined Boeing in November 2016, nearly 11 months after the MAX’s first test flight. If that was not the reason for his exit, what else could have prompted Boeing to make such a drastic change at such a tenuous time?
“Why would you want to get rid of the head of your commercial division in the midst of possibility the greatest crisis in its history?” says the analyst, who was not authorized to publicly comment on McAllister’s dismissal.
News of McAllister’s departure also came just days after a congressional committee released messages between two Boeing test pilots that appear to show the aerospace giant knew there was a serious problem with an automated flight control system designed for the MAX. The head of the Federal Aviation Administration, Stephen Dickson, sent an angry letter to Boeing Chief Executive Dennis Muilenburg, demanding to know why the company held onto the chat log for months before turning it over. Boeing issued a statement Sunday that the test pilots’ chat messages have been misinterpreted and refer only to a problem with the flight simulator, not with any MAX systems.
Yet despite the severity and amount of wounds suffered by both Boeing and Muilenburg (who the company’s board of directors stripped of his chairman role on Oct. 11), none of the bad news seems to have been fatal to the company’s brand. The next few months, however, will be critical—and both Boeing and its CEO’s futures hang in the balance. Can the company smoothly get the 737 MAX back into the sky? And can the airplane maker and airlines get passengers back into seats?
Losing the benefit of the doubt
Many of the injuries to Boeing’s brand have been self-inflicted, a result of its muddled public relations through the MAX crisis, several analysts have said. The company has been criticized for being aloof in the wake of the crashes of Lion Air Flight 610 in October 2018 and Ethiopian Airlines Flight 302 in March. Its public presence has continued to come up short in the eyes of many, even prompting two influential analysts—Ernest Arvai of AirInsight and Scott Hamilton of Leeham Co.—to recently call for Muilenburg’s resignation.
As a result, Boeing appears to have lost the benefit of the doubt with with many airlines, pilots, and much of the flying public. The comopany has repeatedly has been forced to push back its estimates for fixing the 737 MAX’s automated flight-control system, which have been identified as significantly contributing to the crashes. Several airlines expect Boeing’s estimates for the MAX’s return to service are several months too optimistic. And in early October, the union representing Southwest Airlines pilots sued Boeing for lost wages and other damages in a state court in Dallas.
Boeing officials now say they expect Federal Aviation Administration regulators to certify the plane by the end of the year. Company test pilots have conducted more than 700 flights, and the aerospace giant is “confident in the safety of the airplane,” Muilenburg said in a recent public appearance in New York.
But the FAA and its counterpart across the Atlantic, the European Aviation Safety Agency (EASA), have declined to set a timeline for the plane’s return to service. The FAA’s certification process for the flight-control system, the maneuvering characteristic augmentation system (MCAS), has drawn Capitol Hill’s attention, as well as criticism from industry watchers.
Boeing’s legal department has seemed to dominate the company’s public handling of the MAX crisis so far. Company officials have shied away from sincerely taking responsibility for Boeing’s role in the crashes, instead making vague statements about owning a culture of safety, analysts have said.
“Lawyers seem to be more in control (of Boeing’s public relations) than anybody,” aerospace analyst Richard Aboulafia tells Fortune. “We’re getting to the crucial phase for the company,” the vice president of the Fairfax, Va.-based Teal Group says. If the MAX’s return to service is relatively smooth from here on out, “they will be fine,” but any significant bumps or bungled public relations could seriously hurt the company’s future, he adds.
In the shadow of the 787
This isn’t Boeings first major grounding, and that may be part of its problematic response. In 2013, the aviation industry and the flying public shook off the worldwide grounding of the company’s 787 due to battery fires on the new airplane, says Ron Epstein, an aerospace analyst with Bank of America Merrill Lynch. But that crisis did not result in accidents, he notes.
Still, Epstein cautions, the 737 Max is worse than the 787 grounding for reasons beyond the obvious. “The 787 was all new, and there were plenty of (new technology and production processes) that could go wrong,” he says. “This is the fourth generation of the 737—this should never have happened.”
To be sure, the MAX is the significantly overhauled and impressively engineered offspring of a workhorse and a cash cow. But flyers appear to be much more rattled by the two MAX crashes than they were by the 787 fires.
According to an April survey by Atmosphere Research, more U.S. flyers plan to avoid flying on the single-aisle airplane in the first six months of its return to service than are willing to fly on one. The company’s blunt assessment in its report is that, “Boeing has lost passengers’ trust and respect.”
Regaining that faith could prove to be more difficult abroad than in the U.S., says Ken Herbert, a San Francisco-based aerospace analyst for Canaccord Genuity. Herbert heard anecdotal reservations from European pilots about the plane’s safety. “If pilots are voicing concerns, you can just imagine what is in passengers minds,” he says.
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