Boeing and Airbus: Clearing the air

February 09, 2020

Boeing and Airbus executives have touched down in Singapore for a bi-annual industry show to tout their wares to Asian airlines, the world’s largest commercial aircraft market.

But both companies arrive at the Singapore Air Show battered, bruised and poorer.

Boeing, from the grounding of its bestselling jet the 737 MAX with a $18 billion write-off, while Airbus fined for allegedly bribing customers to buy its competitor the A320.

The US aerospace giant has reported a full-year loss for 2019 of $636 million, its first in just over 20 years.

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The loss is dominated by the 737 MAX disruption with overall costs associated with the crashes and subsequent groundings put at over $18 billion.

New President and chief executive Dave Calhoun has reiterated his full support for the MAX and that support is well-founded with airlines clamouring to get the jets back in the air which is expected by mid-year.

While Boeing accepted responsibility for the crashes that killed 346 and led to the grounding many in the industry disagree and say most blame lies with the pilots.

Dave Calhoun

Well known, former US National Transport Safety Board crash investigator and air safety expert Greg Feith, says that while the Indonesian NTSC crash report into the Lion Air 737 MAX tragedy presents an in-depth account of the “factual” information developed during the course of the investigation it is flawed in its conclusions.

Mr Feith told West Business last month that “there are so many flaws in logic, failures to properly analyse the facts, and failures to hold persons or organizations accountable and much more. They (NTSC) obviously reverse-engineered the “facts” to support their preconceived conclusions that the airplane and MCAS (flight software) are to blame.”

The blame game aside, the unprecedented grounding, led by China at the time in trade spat with the US, has developed into a perfect storm for Boeing, with regulators, politicians and unions weighing into the debate over the safety of the 737 MAX.

Last week, however, good news is merging for Boeing with the US regulator, the FAA, saying there appears to be a global consensus that the modifications for the MAX, designed almost six months ago, will be ticked off. 

In fact, Boeing and the FAA have gone much further than improving the flight control software and put modifications into the 737 MAX for scenarios that have never occurred before.

Boeing’s Mr Calhoun said that “it’s a very challenging moment for Boeing. We got a lot of work to do. But I’m confident that we’ll manage this situation in the right way, and I’m optimistic about the company’s future, both in terms of the markets that we serve and maybe, more importantly, the engineering and technical capabilities we bring.”

The aerospace giant has also replaced its Boeing Commercial Airplane’s President with the down to earth but no-nonsense career engineer Stan Deal.

Stan Deal

Both Mr Calhoun and Mr Deal have hit the runway running visiting the vast network of plants across the US.

“I’ve been spending a lot of my first week’s meeting, connecting with, listening to my Boeing teammates across the country. What I’m seeing and hearing is that our employees are incredibly proud to work at Boeing, but they’re also hurt and disappointed that we’ve let our stakeholders down.

“Together, we’re committed to getting back on our front foot, learning with humility and building on the powerful legacy they and their predecessors have created over the last century. This includes engaging with one another and our stakeholders with greater transparency, holding ourselves accountable to the highest standards of safety and quality and incorporating an outside-in perspective on what we do and how we do it.”

Mr Deal has tossed aside the trappings of the executive dining rooms and has been seen at the production line canteens pressing the flesh with mechanics who assemble aircraft.

The stakes are massive.

Boeing has a backlog of 5,406 commercial aircraft and annual sales of $74.75 billion.

Its latest jet the 777X has just flown after a nine-month delay related to its new General Electric engines.

Airlines are also keen to get their hands on this new monster powered by the world’s largest jet engine. 

The 777X burns 84 per cent less fuel per passenger than Boeing’s first jet transport the 707.

At its arch-rival Airbus the story is more about alleged corruption.

Airbus, with annual sales of around $72 billion, is the great European success story and essentially splits the market with Boeing for aircraft above 100 seats.

But it also has its troubles. Last year it finally cancelled its giant A380 because airlines were opting for far more fuel-efficient and flexible aircraft such as its own twin-engine A350 and Boeing’s 787 and 777.

For instance, the Qantas 787-9 that flies to London nonstop every night from Perth burns 34 per cent less fuel per passenger than its A380.

Clearing the deck of the A380 will enable Airbus to focus on its best selling 180-250 seat A320 and its larger popular A350 and A330neo.

However, some of those sales are the subject of alleged bribes with Airbus last week reaching agreements with French, UK and US investigators.

Airbus has agreed to pay penalties of €3,598 million ($3.39 Billion) and received credit from the authorities for having reported the alleged bribes.

In a statement, Airbus said that it had “taken significant steps to reform itself and to ensure that this conduct will not reoccur. Airbus has significantly enhanced its compliance system under the supervision of an Independent Compliance Review Panel. The Company is committed to conducting business with integrity.”

Denis Ranque

Denis Ranque, Chairman of the Board of Directors of Airbus, stated that “the settlements…..turn the page on unacceptable business practices from the past.”

New Airbus chief executive Guillaume Faury, said that “the lessons learned enable Airbus to position itself as the trusted and reliable partner we want to be.”

Guillaume Faury

Looking forward, Airbus and Boeing, bloodied and down but by no means out, will now focus on the 44,000 aircraft worth $6.67 trillion that will be needed over the next 20 years for replacement and growth with a renewed focus on safety and integrity.