Why the Boeing fiasco will not kill the 737 MAX.

March 14, 2019
Boeing Ethiopian 737 MAX
Image: CNBC

This week should have been a triumph for Boeing with the much-anticipated rollout of the 777X in Seattle.

Instead, the 777X has been quietly rolled out to staff and the aviation giant is facing a major crisis involving its most popular product.

The crash of two new aircraft of the same model, the 737 MAX 8, within less than five months of each other has battered the aerospace company’s share price, inflicted reputational damage and raised safety concerns about the latest variant of its workhorse 737 family.

READ: Trump announces US grounding of all Boeing 737 Max planes

Boeing has faced crises before.  Most recently, the launch of the Boeing 787 Dreamliner turned out to be more of a nightmare as it was hit by production problems and the fledgling fleet was grounded for three months in 2013 due to overheating batteries.

Yet how many people today step on board a now commonplace 787 worrying whether the batteries will catch fire?

The planemaker quelled public disquiet by introducing a solution to the problem and embarking on a publicity offensive to explain what had happened and how it had dealt with it.

But that crisis involved a much smaller number of aircraft and nobody died.

This time 346 people are dead, social media and the 24-hour news cycle reign supreme and company’s problems are unfolding in a politically-charged global climate.

READ: The 737 is the plane many at Boeing did not want.

A big problem for Boeing is that is not clear yet what caused the crash but, even so,  it lost control of the story early on.

The immediate damage could be seen on the New York Stock Exchange

Boeing’s share price experienced its biggest intraday fall since 9/11 on news that the second 737 MAX 8, Ethiopian Flight 302, had crashed with 157 people on board.

Two days of significant falls wiped almost $US28 billion from Boeing’s market cap but the share price appeared to have stabilized by market close on Wednesday, closing 0.46 percent higher at $US377.14.

This was despite the US announcement that the Federal Aviation Administration had joined other regulators in suspending  737 MAX operations and Boeing’s revelation that it had recommended the global fleet be grounded.

There is likely to be more financial pain coming as airlines claim compensation for the groundings, something Norwegian Air has already vowed to do.

Carter Copeland, the president and lead aerospace analyst at Melius Research, told CNBC  the cost reparations and fixes could be as high as $US1 billion and other analysts have come up with similar back-of-the-envelope calculations.

Some airlines might also consider their orders for the fuel-efficient jet: Virgin Australia softened its language this week on the question of whether it would proceed with its order and Garuda Indonesia and Lion Air have  threatened to cancel.

However, that would mean they would not benefit from the advantages offered by the MAX in terms of fuel efficiency, range and costs. Switching to the rival Airbus A320neo family is a major exercise and can result in a less efficient mixed fleet.

Then there is the reputational damage as passengers, rightly or wrongly, link the new Boeing 737 to safety issues.

In addition to the sobering fact that two relatively new planes of the same type have gone down within months of each other, there are also so-far unproven suggestions that the two might be linked.

Speculation about this has generated no shortage of TV images with people saying that they don’t want to fly on a 737 MAX because they’re worried the plane is unsafe.

Boeing, pilots and several airlines continue to stand by the aircraft and its safety. These include airlines that have had experience operating the plane such as US carriers Southwest and American as well as Fiji Airways.

But that stance suffered something of a dent Wednesday when the FAA said new satellite data and about the aircraft’s configuration during take-off could together indicate some similarities between the Ethiopian and Lion Air tragedies.

It said these warranted “further investigation of the possibility of a shared cause for the two accidents that needs to be better understood and addressed”.

Further adding to this was comments by Ethiopian’s chief executive that one of the doomed plane’s pilots had told air traffic control the plane was experiencing “flight control problems”.

The key to the conundrum will be, as it always has been, will be the information retrieved from the flight data recorder (FDR)  and cockpit voice recorder (CVR).

It was the FDR that gave some insight into what happened in the Lion Air crash and showed that the pilot was fighting the plane’s automatic systems to the end.

Why that was and what part a new flight control law known by the acronym MCAS that tried to push down the plane’s nose after it received erroneous information from a faulty angle of attack sensor has yet to be fully explained.

Maintenance appears to have played a role and an important factor was the failure of the pilot to follow to an established procedure to shut down the automatic trim stabilization system.

The US Federal Aviation Administration issued an emergency airworthiness directive after the Indonesian crash warning pilots to follow procedures and has since been working with Boeing on improving the system.

It could still be that the two crashes are not linked and it seems unlikely that the sequence of events leading to the Lion Air accident would be replicated exactly in Ethiopia.

Ultimately, it will down to Boeing and regulators to do what they did with the 787s in 2013: explain to the public what happened and what they are doing to make the MAX family safer.

A saving grace for the planemaker is that the public memory is notoriously short and today’s controversy is likely to quickly become whatever is the digital equivalent of a fish wrapper.

There’s even precedent for this involving the 737, albeit without the firestorm accelerator of the internet.

USAir in 1994 had two fatal accidents over three months and suffered an initial hit to its reputation and sales but it had recovered just 12 months later.

The second of those crashes, USAir Flight 427, was due to a fault in the 737 rudder system and produced the longest investigation in the history of the National Transportation Safety Board.

After an investigation lasting more than four and a half years, the NTSB concluded in 1999 that a jam in the rudder caused it to deflect in a direction opposite to that commanded by the pilots.

It also concluded that similar rudder problems were involved in crashes of 737s operated by United Airlines and Eastwind Airlines.

Boeing pointed to pilot error as the cause of the USAir accident but agreed to redesign the rudder system and paid for a retrofit of the global 737 fleet.

The 737 motored on as Boeing’s biggest success story to become the best-selling jet in history.