Boeing's Rise and Fall: Stalling in Turbulent Weather - The Downfall (Part 2)

Over the last couple years, critics have argued that Boeing’s downfall - as well as the end of its almost flawless safety record - began after the unfortunate merger with McDonnell Douglas in 1997. Two of aviation’s largest titans and bitter rivals came together in what was the tenth-largest merger in US history. Nearly 20 years later, Boeing’s fleeting reputation has become the aviation story of the year, or perhaps the decade - the crashes of two 737 Max planes and the loss of 346 lives, not to mention the still-rising associated costs of around $10 billion.

Events which followed the merger are blamed for the company’s tarnished image as an immediate change of priorities in the company’s culture quickly became evident to the rest of the world. Ground-breaking, advanced engineering went out of the window and McDonnell Douglas’s profit-seeking and cost-cutting methods were implemented. Employee happiness became a distant thought and passenger safety was being jeopardized. Clive Irving, considered as one of aviation’s most experienced critics, talked about this ill-fated decision in his 2014 book Jumbo: The making of the Boeing 747: “The fatal fault line was the McDonnell Douglas takeover, although Boeing was supposed to take over McDonnell Douglas, it ended up the other way around.”

Around the same time, during the early 1990’s, a new competitor swooped into the market and took the industry by storm. Airbus, now the largest firm in commercial aviation, holds a market share of 60.4% whereas Boeing holds the other 40%. Airbus’s commercial success can be owed to their best-selling single aisle jet, the A320. Not only did this plane revolutionize air travel for multiple airlines, but it also became the go-to fleet choice for Low Cost Airlines globally. The numbers speak for themselves, as Airbus has steadily taken market share away from Boeing, and had an order book 56% larger than Boeing’s at the end of September 2019. Moreover, in October 2019, the A320 surpassed the B737 as the highest selling commercial airliner globally. 

There’s a popular saying in the business world: ‘Trust takes years to build, seconds to break, and forever to repair’. This can be used to summarize Boeing as a company over the past decade. Nonetheless, competition continued to grow between the two rivals, Airbus launched their newer, more efficient version of the A320 - the A320neo. This caused huge panic among top executives at Boeing, and fearing a huge loss to their rivals once airlines started placing large orders for the neo, the 737 MAX was announced. What followed was a series of baffling mistakes and eventually led to the MAX becoming the most infamous aircraft in aviation history. Testing of the MAX continued for the next couple of years, however, behind the scenes, a crude culture of profit maximization had spread to all branches of the firm. Boeing set their engineers strict target deadlines, and a rushed design for the plane meant that safety, which gave Boeing their reputation for so many decades, was heavily compromised. 

A significant problem which Boeing faced with the MAX was their engines. In order to fit more fuel efficient engines, Boeing realized that the engines would have to be placed lower down and slightly in front of the winglets. This was different to the regular B737, where the engines were more towards the rear of the fuselage (airframe), and this decision led to a change in the MAX’s center of gravity. The engineers at Boeing had an issue: whenever a pilot would increase thrust on the MAX, the plane would respond by pitching down (essentially pushing the nose down). If ignored, this could cause the plane to behave erratically and crash. Well, the engineers’ solution to this problem was a computer system called MCAS. 

Essentially, MCAS was designed to automatically trim (change the pitch of the nose) the aircraft. Whenever the system detected a nose down pitch due to increased thrust MCAS kicked in and trimmed the plane; this was often way more than necessary and actually could cause the plane to stall. The surprising detail however is that pilots were completely unaware of MCAS - Boeing had decided that B737 pilots would not require any extra training whatsoever to fly the MAX. Many critics believe this decision was very naive, and most likely a result of increased pressure to launch the MAX and get it delivered to as many airlines as quickly as possible. The MAX’s first flight commercially was in March of 2017, when it was delivered to Indonesian low cost airline LionAir. Just over a year later, in October of 2018, a LionAir 737 MAX crashed a few minutes after takeoff and killed everyone on board. The downfall of Boeing was well and truly underway - and things were about to get much worse. 

Initially, Boeing blamed the crash completely on the airline, the pilots and their faulty training. Much of the aviation world was still unaware of the silent killer (MCAS) which was declared as the official cause of the crash once the final report was published. The storm carried on: just 6 months later an Ethiopian Airlines B737 MAX crashed in almost identical fashion to the LionAir crash, and once again everyone on board had died. Battered and bruised, Boeing finally admitted to MCAS being installed on the MAX, however it was too little too late as a week later, airlines across the globe grounded the MAX. The plane remained grounded for over a year but caused unimaginable damage financially and reputationally to the company. 

It would be safe to say that Boeing is in much more than just a ‘bad patch’ for the firm. A quick look at their financials (for the past decade and into 2024) tells us a grim story which may continue for a while, given that Airbus is way ahead in orders currently. The impact of the two MAX crashes is evident: In 2018, a total of 806 aircraft were delivered to commercial airlines. However, in 2019 the deliveries fell to a mere 380 units - a staggering 53% fall in aircraft deliveries. Annual net revenue also fell by more than 30 million dollars in 2019 compared to the previous year, and their annual net income for 2023 was $-2.222B, a 54.97% decline from 2022. 

The Boeing story is more than just a failure of a large company: it’s a lesson to many firms in all industries of how prioritizing profits and greed over fostering a collective work culture, where employees are motivated to ensure quality and safety is never compromised, can unfortunately become an achilles heel.