In 2020, Have Boeing’s Problems Just Begun? – Forbes

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In 2020, Have Boeing’s Problems Just Begun? – Forbes
US-AVIATION-BOEING

The date on the calendar may have changed, but in 2020 Boeing is facing the same problem: when, and if, the 737 MAX aircraft grounded worldwide will be deemed safe enough to fly

But with investigations, questions about other Boeing aircraft, strong competition, a possible economic slowdown, continuing management and communications issues, and distrust throughout the industry, even after ten years on Boeing’s board, incoming CEO David Calhoun will have his hands full.

While Boeing has a new CEO and a new head of commercial aviation, the company still faces questions about management, a demoralized engineering team and the oversight (or lack of same) by the board of directors. The company will also be responsible for billions of dollars in payments to airline customers and the families of 737 MAX crash victims.

Ironically, Boeing, a company once dedicated to engineering excellence but more recently focused on cost-cutting, may lose $10 billion on the MAX fiasco. Since 2018, when the first 737 MAX crash occurred, Boeing has displayed “an absence of leadership, an absence of strategy and an inability to communicate,” Richard Aboulafia, vice president of analysis at aviation consulting firm Teal Group, told the Seattle Times.

Clearly, the number one issue remains the uncertain status of the Boeing 737 MAX program. Over 400 of the aircraft have been grounded by the FAA since March 13, 2019 due to reported issues with its flight control system.

Even if Boeing’s fixes to the MAX are approved by the FAA and other world aviation bodies soon, American Airlines has the 737 MAX off its flight schedule until April 7, Southwest until April 13, United until June 4. These dates are subject to slippage, just as previous back-in-service guesstimates have been pushed back.

The crisis has led to the demotion and eventual firing of Boeing CEO Muilenberg, questions about how much “broad oversight of its own work” the FAA allowed Boeing, lawsuits from the families of victims, the airlines, pilots and flight attendents, and a stock decline.

The 737 MAX issue may also have helped create a kind of “reverse halo” situation,. That is, Congressmen from the House Transportation Committee and the Subcommittee on Aviation, already concerned about Boeing overriding complaints from FAA inspectors on the 737 MAX demanded answers about what they considered a potential safety issue on the 787 Dreamliner.

Boeing reportedly wanted a design change to remove a thin layer of copper foil from the Dreamline’s wings. The foil was designed to protect the carbon-fiber aircraft and its fuel tanks from a lightning strike. The local FAA office in charge of certifying Boeing designs refused to sign off on it, but Boeing appealed and senior FAA managers overruled the certifying group.

Beyond the technical and communications issues involved, such a cozy relationship between regulators and regulated raise questions.

In an unrelated business issue, production of the Dreamliner, one of Boeing’s “cash cows,” has been slashed from 14 per month to 12, starting late this year. In October, when the production cuts were announced, Boeing blamed it on the chilly trade environment between the U.S. and China.

Now-former Boeing CEO Dennis Muilenburg said “a lack of orders from China over the past few years has put pressure on the company’s wide-body production rate, especially that of the 787.” He added, in what was his last earnings call, that Boeing still believed in the long-term viability of the wide-body market.

While Muilenberg blamed the Chinese, there are possibly a couple of inconvenient truths that he did not mention. One is that worldwide sales of wide-body aircraft are slowing in general. A Reuters analysis found that between January and September of 2019, combined net orders for Boeing and Airbus wide-body jets fell by 56.4% to 105 planes. The end of production of the Airbus A380, the biggest widebody of them all, was announced during this period.

Analysts estimated that wide-bodies generate about half of commercial aircraft gross profits, even though the big boys only account fora quarter of sales.

As Reuters put it, at over $200 million each, the long-range 787 and competitive Airbus A350 widebodies (approximately 300 passegers) cost twice as much as smaller planes. The Reuters analysis of two decades of Boeing and Airbus orders claims that as the economy weakens, orders for widebody jets, which are both more expensive and have longer delivery times, fall more than for smaller jets.

Boeing also faces increasing competition. The Airbus A350, a Dreamliner competitor, is gaining popularity among airlines and passengers. It can also challenge in the Dreamliner in terms of range. Singapore A350 aircraft currently fly the world’s longest flight, the 9500-mile route from New York to the island state.

Finally, economics may be causing airlines to switch from larger, more expensive twin-aisle wide-bodies like the Dreamliner and the Boeing 777 to smaller, cheaper to operate single-aisle twin jets. Boeing had its own contender in this “small is beautiful” arms race until the 737 MAX was grounded.

Meanwhile, US airlines like JetBlue, American, United and others have purchased Airbus A321neo variants that can fly 4000 miles with 200 passengers, Now, Airbus’s order backlog for A321neo variants is reported 3,200 airplanes, as “the middle market has gotten way bigger than anyone expected,” said Aboulafia.

Speaking of the “middle market,” the aviation industry has been awaiting the launch of an all-new Boeing aircraft, the New Middle Market Airplane, for years now.

The NMA, sometimes unofficially referred to as the “797,” is rumored to come in two versions, one capable of carrying 225 passengers 5000 nautical miles, the other 275 passengers 4500 nautical miles.

The Boeing craft would be focused on the so-called “middle-market” of 8 to 10 hour flights, such as Chicago to Europe. As such it’s seen as a possible replacement for aging Boeing 757 and 767 aircraft.

To date, although there is considerable airline interest, the aircraft has yet to be announced. The plane was rumored for announcement at last year’s Paris Air Show, but Boeing, engulfed in 737 MAX issues, did not launch it.

Meanwhile, competitor Airbus has introduced popular variants of the A321neo, like the A321LR (Long Range) and A321XLR (Extra Long Range.) with slightly lower passenger capacity and similar range.

Can Boeing Bounce Back?

These and other issues will make 2020 a challenging year for Boeing. Yet Boeing is a great company, with one hundred years of achievements in aerospace design and manufacturing. It has survived industry upheavals, wars and innumerable crises.

The process of regaining trust is always a difficult one. As a long-time communications professional, I’d say a little openness and transparency would go a long way.

“>

US-AVIATION-BOEING

Southwest Airlines Boeing 737 MAX aircraft are parked on the tarmac after being grounded, at the … [+] Southern California Logistics Airport in Victorville, California on March 28, 2019. – After two fatal crashes in five months, Boeing is trying hard — very hard — to present itself as unfazed by the crisis that surrounds the company. The company’s sprawling factory in Renton, Washington is a hive of activity on this sunny Wednesday, March 28, 2019, during a tightly-managed media tour as Boeing tries to communicate confidence that it has nothing to hide. Boeing gathered hundreds of pilots and reporters to unveil the changes to the MCAS stall prevention system, which has been implicated in the crashes in Ethiopia and Indonesia, as part of a charm offensive to restore the company’s reputation. (Photo by Mark RALSTON / AFP) (Photo credit should read MARK RALSTON/AFP via Getty Images)

AFP via Getty Images

The date on the calendar may have changed, but in 2020 Boeing is facing the same problem: when, and if, the 737 MAX aircraft grounded worldwide will be deemed safe enough to fly

But with investigations, questions about other Boeing aircraft, strong competition, a possible economic slowdown, continuing management and communications issues, and distrust throughout the industry, even after ten years on Boeing’s board, incoming CEO David Calhoun will have his hands full.

While Boeing has a new CEO and a new head of commercial aviation, the company still faces questions about management, a demoralized engineering team and the oversight (or lack of same) by the board of directors. The company will also be responsible for billions of dollars in payments to airline customers and the families of 737 MAX crash victims.

Ironically, Boeing, a company once dedicated to engineering excellence but more recently focused on cost-cutting, may lose $10 billion on the MAX fiasco. Since 2018, when the first 737 MAX crash occurred, Boeing has displayed “an absence of leadership, an absence of strategy and an inability to communicate,” Richard Aboulafia, vice president of analysis at aviation consulting firm Teal Group, told the Seattle Times.

Clearly, the number one issue remains the uncertain status of the Boeing 737 MAX program. Over 400 of the aircraft have been grounded by the FAA since March 13, 2019 due to reported issues with its flight control system.

Even if Boeing’s fixes to the MAX are approved by the FAA and other world aviation bodies soon, American Airlines has the 737 MAX off its flight schedule until April 7, Southwest until April 13, United until June 4. These dates are subject to slippage, just as previous back-in-service guesstimates have been pushed back.

The crisis has led to the demotion and eventual firing of Boeing CEO Muilenberg, questions about how much “broad oversight of its own work” the FAA allowed Boeing, lawsuits from the families of victims, the airlines, pilots and flight attendents, and a stock decline.

House Transportation Committee Holds Hearing On Oversight Of Boeing 737 Max Certification

WASHINGTON, DC – DECEMBER 11: FAA ADMINISTRATOR Stephen M. Dickson and Earl Lawerence speaks at a … [+] Oversight Hearing on December 11, 2019 in Washington, DC. A Federal Aviation Administration analysis document predicted there would be more than 15 additional fatal crashes of the MAX over its lifetime, and was made public Wednesday at a House Transportation Committee hearing on Wednesday. (Photo by Tasos Katopodis/Getty Images)

Getty Images

The 737 MAX issue may also have helped create a kind of “reverse halo” situation,. That is, Congressmen from the House Transportation Committee and the Subcommittee on Aviation, already concerned about Boeing overriding complaints from FAA inspectors on the 737 MAX demanded answers about what they considered a potential safety issue on the 787 Dreamliner.

Boeing reportedly wanted a design change to remove a thin layer of copper foil from the Dreamline’s wings. The foil was designed to protect the carbon-fiber aircraft and its fuel tanks from a lightning strike. The local FAA office in charge of certifying Boeing designs refused to sign off on it, but Boeing appealed and senior FAA managers overruled the certifying group.

Beyond the technical and communications issues involved, such a cozy relationship between regulators and regulated raise questions.

In an unrelated business issue, production of the Dreamliner, one of Boeing’s “cash cows,” has been slashed from 14 per month to 12, starting late this year. In October, when the production cuts were announced, Boeing blamed it on the chilly trade environment between the U.S. and China.

Now-former Boeing CEO Dennis Muilenburg said “a lack of orders from China over the past few years has put pressure on the company’s wide-body production rate, especially that of the 787.” He added, in what was his last earnings call, that Boeing still believed in the long-term viability of the wide-body market.

U.S-SEATTLE-BOEING-100TH 787 AIRCRAFT-CHINESE AIRLINE INDUSTRY-DELIVERY

SEATTLE, Nov. 21, 2019 — A Boeing 787 Dreamliner carrying a special logo “100th 787 for China” is … [+] delivered to China’s Juneyao Airlines in Seattle, Washington state, the United States, Nov. 20, 2019. U.S. aircraft giant Boeing Company on Wednesday delivered the sixth 787-9 Dreamliner to China’s Juneyao Airlines, the 100th direct-buy 787 jet by the Chinese airline industry. (Photo by Wu Xiaoling/Xinhua via Getty Images)

Xinhua News Agency/Getty Images

While Muilenberg blamed the Chinese, there are possibly a couple of inconvenient truths that he did not mention. One is that worldwide sales of wide-body aircraft are slowing in general. A Reuters analysis found that between January and September of 2019, combined net orders for Boeing and Airbus wide-body jets fell by 56.4% to 105 planes. The end of production of the Airbus A380, the biggest widebody of them all, was announced during this period.

Analysts estimated that wide-bodies generate about half of commercial aircraft gross profits, even though the big boys only account fora quarter of sales.

As Reuters put it, at over $200 million each, the long-range 787 and competitive Airbus A350 widebodies (approximately 300 passegers) cost twice as much as smaller planes. The Reuters analysis of two decades of Boeing and Airbus orders claims that as the economy weakens, orders for widebody jets, which are both more expensive and have longer delivery times, fall more than for smaller jets.

Boeing also faces increasing competition. The Airbus A350, a Dreamliner competitor, is gaining popularity among airlines and passengers. It can also challenge in the Dreamliner in terms of range. Singapore A350 aircraft currently fly the world’s longest flight, the 9500-mile route from New York to the island state.

Finally, economics may be causing airlines to switch from larger, more expensive twin-aisle wide-bodies like the Dreamliner and the Boeing 777 to smaller, cheaper to operate single-aisle twin jets. Boeing had its own contender in this “small is beautiful” arms race until the 737 MAX was grounded.

Meanwhile, US airlines like JetBlue, American, United and others have purchased Airbus A321neo variants that can fly 4000 miles with 200 passengers, Now, Airbus’s order backlog for A321neo variants is reported 3,200 airplanes, as “the middle market has gotten way bigger than anyone expected,” said Aboulafia.

Speaking of the “middle market,” the aviation industry has been awaiting the launch of an all-new Boeing aircraft, the New Middle Market Airplane, for years now.

The NMA, sometimes unofficially referred to as the “797,” is rumored to come in two versions, one capable of carrying 225 passengers 5000 nautical miles, the other 275 passengers 4500 nautical miles.

The Boeing craft would be focused on the so-called “middle-market” of 8 to 10 hour flights, such as Chicago to Europe. As such it’s seen as a possible replacement for aging Boeing 757 and 767 aircraft.

To date, although there is considerable airline interest, the aircraft has yet to be announced. The plane was rumored for announcement at last year’s Paris Air Show, but Boeing, engulfed in 737 MAX issues, did not launch it.

Meanwhile, competitor Airbus has introduced popular variants of the A321neo, like the A321LR (Long Range) and A321XLR (Extra Long Range.) with slightly lower passenger capacity and similar range.

Presentation of the first TAP A321LRneo

LISBON, PORTUGAL – APRIL 05: Presentation of the company’s first Airbus A321LRneo in a hangar at TAP … [+] headquarters in Humberto Delgado International Airport on April 05, 2019 in Lisbon, Portugal. The A321LR, a new variant of Airbus’ A321neo, has the longest range of any single-aisle jetliner, being able to fly routes of up to 4,000 nm with 206 passengers while utilizing extra fuel stored in three Additional Centre Tanks (ACTs). TAP plans to acquire up to 12 airplanes like this one. (Photo by Horacio Villalobos#Corbis/Corbis via Getty Images)

Corbis via Getty Images

Can Boeing Bounce Back?

These and other issues will make 2020 a challenging year for Boeing. Yet Boeing is a great company, with one hundred years of achievements in aerospace design and manufacturing. It has survived industry upheavals, wars and innumerable crises.

The process of regaining trust is always a difficult one. As a long-time communications professional, I’d say a little openness and transparency would go a long way.

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