Faulty door plugs open old wounds at Boeing


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NOTERVOUS TRAVELERS will break out in a cold sweat after seeing photos of a gaping hole in the fuselage of an Alaska Airlines Boeing 737 MAXIMUM 9, exploded at 15,000 feet (4,600 meters) after the plane took off over Oregon on January 5. Nervous investors will have the same reaction to the stock prices of Boeing and Spirit AeroSystems, a company spun off by the planemaker in 2005. Spirit made the fuselage and the faulty part, a plug in the airframe where some MAXIMUM 9 models can have an emergency exit. The stock market value of the two companies plunged by 8% and 11% respectively following the incident.

Miraculously, no one was seriously injured; Had the plane depressurized quickly at a higher altitude, the outcome could have been worse. The precise cause of the malfunction remains unclear. The plane, delivered to Alaska Airlines on November 11, was brand new. Similar unused emergency exits were installed without issue on a previous version of the 737.

image: The Economist

Regulators around the world have grounded the entire fleet of MAXIMUM 9 with the same door stopper, awaiting inspections to ensure their airworthiness. Early indications suggested a one-off manufacturing issue originating from Spirit. But on Jan. 8, United Airlines said preliminary reviews had identified other planes with door-related “installation issues,” such as “bolts requiring additional tightening.” That indicates a “pattern of poor workmanship” at Spirit that Boeing should have had better oversight of, says Bernstein, a broker.

Fortunately for Boeing, its airline customers and their passengers, tightening the loose bolt shouldn't be too difficult. THE MAXIMUM 9, a larger version of Boeing's short-haul workhorse, makes up just over 15% of all 737s MAXIMUMes in service, and an even lower share of unfilled orders (see graph 1). Only four of the five existing MAXIMUM 9 fleets, or 171 aircraft in total, have unused exits. The biggest problem for Boeing is that this episode reinforces the impression that it has lost its way.

The descent of the former high-flying US aerospace champion began in October 2018, when a 737 MAXIMUM crashed in Indonesia. Five months later, the same model crashed in Ethiopia. Both disasters were linked to problems with flight control software and led to the entire 737 being grounded. MAXIMUM floated for 20 months while the software was repaired. Boeing has paid approximately $20 billion in fines and compensation. Critics alleged the company paid too much attention to returning money to shareholders and not enough to engineering. A new chief executive appointed in early 2020 to save Boeing's image, Dave Calhoun, has promised to return the company to its roots of technical excellence.

The gate drama is just the latest sign that Mr. Calhoun's task remains incomplete. Deliveries of Boeing's long-haul 787 Dreamliner have been suspended several times in recent years due to quality control issues. In April 2023, the company announced it would need to repair the vertical stabilizers of 737s in production at Spirit and in storage. Although it was not a safety risk, the defect further damaged Boeing's reputation. Another blow came in August, when the aircraft maker said it would need to correct poorly drilled holes in part of the 165 737's pressurized cabin. MAXIMUMare assembled by the Spirit. Fixing manufacturing issues is one reason Boeing's 777 deliveriesXanother long-haul aircraft, will not start until 2025, six years late.

image: The Economist

The 777X the delay alone cost the company at least $8 billion in additional costs. The Oregon case risks getting even worse, forcing this country to improve its production processes. Boeing has not made an annual profit since 2018. It lags its main European rival, Airbus, by 4,800 to 7,300 in orders for short-haul planes. It is struggling to rehire skilled workers laid off during the covid-19 lull as it tries to increase 737 production. MAXIMUM from 38 per month to 50 by 2025-26, to meet strong demand from airlines facing an increase in post-pandemic “revenge” flights.

Some of Boeing's misfortunes under Mr. Calhoun's leadership were beyond his control. Shortly after taking office in early 2020, Covid threw the industry into a tailspin. Boeing and Airbus lost about half their market capitalization between March and the fall of the same year. But while Airbus shares are now trading at a record high, Boeing shares are worth half of what they were worth at their peak in early 2019 (see chart 2). If the American aircraft manufacturer wants to take flight again, Mr. Calhoun will not only have to address the problems, but also prevent new problems from emerging.

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