Two years ago, Boeing was on top. Its stock was up 40% over the previous year. It was one of the hottest stocks around. The outlook for sales and profit was bright. And the company was about to start delivering its new 737 Max jet.
CEO Dennis Muilenberg was addressing Wall Street on a conference call on April 26, 2017. He boasted about how quickly the company had brought the 737 Max to market — and praised the Federal Aviation Administration’s “streamlined” certification process. He attributed that to the pro-business philosophy of the new Trump administration.
“That’s helping us more efficiently work through certification on some of our new model aircraft such as the [737] Max as it’s going through flight test and entering into service,” he told analysts. “So we’re already seeing some benefits there of some of the work that’s being done with the FAA.”
Weeks later, Boeing would deliver its first 737 Max. Today, Boeing faces one of the most serious crises in its 103-year history.
After the March 10 crash of an Ethiopian Airlines 737 Max, coming less than five months after a fatal crash of a 737 Max flown by Lion Air, all of its 737 Max planes were grounded and the plane’s approval process is under scrutiny in Washington.
Crash investigators are about to reveal so-called black box data that should give clues on what went wrong.
Boeing says safety is the company’s top priority, and it continues to work with the FAA and investigators as the company develops potential solutions to the problems with the 737 Max. It also asked for patience from the public until all the facts of the crash are known.
“We urge caution against speculating and drawing conclusions on the findings prior to the release of the flight data,” a Boeing spokesman said.
And in the coming weeks, Boeing (BA) will make public some of the first pieces of hard information on how the crisis may have affected the company’s financial picture.
“This is a huge … issue, not only for its revenue flow and its earnings flow, but for its reputation,” said Jim Corridore, director of industrial equity research for CFRA Research. “It needs to be rectified sooner rather than later.”
How well, and how quickly, Boeing finds a fix to this problem will be crucial for the company. The 737 Max is Boeing’s biggest and most important product by a wide margin.
The company should be able to resolve the problem within three months, said Richard Aboulafia, vice president of analysis at the Teal Group.
“If they can’t, it’s a real drag on engineering resources, management resources, and investor confidence, to say nothing about becoming the mother of all production traffic jams,” Aboulafia said.
Boeing is working to develop a software fix that will get the 371 grounded 737 Max jets back in the air. Boeing had signaled soon after the Ethiopian Airlines crash that the fix would be available in a matter of weeks, but it has yet to be finalized.
The company is awaiting word of the cause to determine its response to the two fatal 737 Max crashes — the Lion Air jet in October as well as the Ethiopian crash. A total of 346 people died in the two accidents. Investigators are focusing on an automatic safety device on the jets that preliminary reports suggest could have been responsible for the crashes.
US Justice Department prosecutors have issued multiple subpoenas as part of an investigation into the FAA’s certification and Boeing’s marketing of that plane model, CNN has learned. Transportation Secretary Elaine Chao also asked the agency’s inspector general to investigate the Max certification process.
Congress already had the first of what could be multiple hearings into the process. It announced an investigation into potential connections between inadequate training and certification of aviation safety inspectors who may have participated in the evaluation of the Boeing 737 Max.
