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It took decades for Boeing to build a reputation as one of the most reliable companies on the planet. It’s taken less than six years to undo it all and leave the once-great American company facing an uncertain future.
Regulators, airlines, fliers and even Boeing’s own workers are practically in revolt after a series of mid-flight disasters and a steady erosion of the company’s quality standards. Investors are none too thrilled, either: Boeing’s stock (BA) is down 27% for the year, making it the second-worst performer in the S&P 500, behind Tesla.
The latest headache for Boeing came Monday, when a 787 Dreamliner flying from Australia to New Zealand plunged suddenly mid-flight, injuring several passengers. It’s not clear what, if any, culpability Boeing has here — it said it’s gathering information about what went wrong. But the accounts from passengers are hardly flattering at a moment when Boeing is already under federal investigation for the Jan. 5 door-plug blowout.
Brian Jokat, a passenger on Monday’s Latam Airlines flight, told CNN he was jolted awake when the plane began falling so suddenly that people were tossed into the cabin ceiling. (In a separate interview with The Wall Street Journal, he said: “You know in The Exorcist, when the girl flies from the bed and hits the ceiling? It’s exactly that scene.” )
For any other company, now would be the time to call the lawyers and start working on a sale or a bankruptcy. Within the past six years, Boeing has been found responsible for two fatal crashes that killed 346 people, lost tens of billions of dollars, paid billions more in fines and settlements, and it made headlines for repeated quality control problems.
But Boeing is not any other company.
And it barely even has regulators to stand up to. The FAA is so underfunded that it has partially relied on Boeing to self-regulate. It’s a wonder that the agency found this week that Boeing failed half of its audit of its production facility. (The FAA has instructed the plane maker to submit a plan to fix its production problems by late May.)
Boeing, in a statement, said it is working diligently to work out the issues highlighted by the FAA.
“Based on the FAA audit, our quality stand downs and the recent expert panel report, we continue to implement immediate changes and develop a comprehensive action plan to strengthen safety and quality, and build the confidence of our customers and their passengers,” Boeing said in a statement. “We are squarely focused on taking significant, demonstrated action with transparency at every turn.”
Too big to fail
The company is often called a duopoly, not a monopoly, because it is, technically, competing globally with its European rival Airbus. But it’s not a true competition. Boeing’s main customers are airlines, which can’t suddenly switch to Airbus if they’re upset with Boeing. Pilots are certified in one or the other, so once you make your choice, you’re pretty much stuck with it.
Given Boeing’s singular importance in the American aviation industry, it is the definition of Too Big to Fail. Boeing is immune to most of the forces, like consumer choice, that other companies must contend with to stay in business. We the people couldn’t get rid of it if we wanted to.
So, how do we solve a problem like Boeing?
“If you ask me, the first thing that needs to happen for Boeing to gain trust is to basically fire the entire C suite,” Gad Allon, a professor at the University of Pennsylvania’s Wharton School of Business, told me Tuesday. “I know that will not happen, but … there is not a single person that has a C in front of their title that is not responsible for what we’re seeing now.”
Allon isn’t holding his breath for Boeing’s board of directors on that front.
Another idea that’s occasionally bandied about: Nationalize Boeing.
Matt Stoller, the director of research at the American Economic Liberties Project, a progressive think tank, made that case in January in his newsletter, arguing that the government has a history of nationalizing utilities, railroads and aerospace firms.
And after all, he notes, Boeing already counts about 40% of its revenue from government contracts and much of the rest from plane orders that US officials regularly peddle abroad.
“Boeing is a state-backed national champion,” Stoller wrote. “The fairy tale of a private firm is only hindering a fix to this once-great organization.”
Of course, Boeing isn’t in the kind of financial distress that typically precedes a government takeover (a fact that’s also courtesy of years of government support, but still). Nationalization seems politically interesting but practically unlikely.
“There’s really no short- and mid-term good option,” Allon says.
The bigger concern, for him, is what happens when these one-off scary events — door plugs ripping away mid-flight, etc — start becoming more frequent.
“This can be really as big as a financial crisis,” considering how many businesses around the world rely on Boeing planes.
He added: “It’s not that I think that there is a risk of all of these planes falling from the sky tomorrow … [But] the moment we start seeing these things as more recurring, I think it moves from being an ‘event risk’ to a ‘continuous risk’ ” that could have devastating consequences.
