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Episode: Can Boeing turn it around?

Author: BBC World Service
Duration: 00:22:59

Episode Shownotes

Aerospace giant Boeing has had big problems to overcome since the crashes of two of its 737 Max aircraft. Its situation was compounded this year with another safety scare and a strike losing it billions of dollars. It has a new CEO who has pledged to return the company to

its engineering roots and away from cost cutting and in October, Boeing managed to raise 21bn US dollars by issuing new shares in the company. However, catching up on lost production will take time and money and financially the company is nowhere near out of the weeds.Can Boeing regain the trust of regulators, airlines and passengers? Contributors: Richard Aboulafia, AeroDynamic Advisory, a US aerospace consultancy Sharon Turlep, an aviation industry reporter at the Wall Street Journal Christine Negroni, an aviation journalist specialising in safety Scott Hamilton, aviation analystPresented by David Baker. Produced by Bob Howard. Researched by Matt Toulson. Edited by Tara McDermott. Mixed by David Crackles.Image credit - Kevin Burkholder via Getty Images

Full Transcript

00:00:00 Speaker_04
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00:00:06 Speaker_08
Hello, Jackie Leonard here from the Global News Podcast. Did you know there is an easy way to get new episodes automatically?

00:00:13 Speaker_08
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00:00:28 Speaker_08
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00:00:34 Speaker_04
Welcome to The Enquiry, with me, David Baker. Each week, one question, four expert witnesses, and an answer. Think back to the last time you got on an aeroplane. Did you notice who made it?

00:00:58 Speaker_04
Probably not, unless you're one of those passengers who studies the safety card in the seat pocket. But chances are, the plane you were on was made by either Boeing or Airbus.

00:01:12 Speaker_04
Between them, these two huge companies, one based in the US, the other in Europe, dominate the commercial aviation industry, producing nearly 90% of the new planes that are in our skies.

00:01:26 Speaker_04
Airbus is on a roll, with airlines around the world snapping up their planes. But Boeing has been having a difficult few years. Its new version of the classic Boeing 737, the 737 MAX, suffered two catastrophic crashes in 2018 and 2019.

00:01:46 Speaker_04
And earlier this year, as we all saw on the news, a door plug blew out of a 737 MAX flying over Portland, Oregon in the US, resulting in the plane decompressing and forcing an emergency landing.

00:02:00 Speaker_04
Add to that a strike that the company has faced in some of its biggest manufacturing plants, and a serious problem with cash flow, and things are not looking great for the aviation giant.

00:02:13 Speaker_04
So this week on The Enquiry, we're asking, can Boeing turn itself around?

00:02:26 Speaker_03
Part 1, Boeing's rise to glory.

00:02:33 Speaker_04
When you look at what goes into developing a new aircraft, it's not hard to see why the sector is dominated by just two companies. First, there's the time it takes.

00:02:44 Speaker_03
It's basically anywhere from 7 to 10 years to develop an airplane into service.

00:02:49 Speaker_04
And then there's the cost.

00:02:51 Speaker_03
Back in the era of when the 787 was being developed in 2003, a wide-body airplane would take $12 to $15 billion to develop and a narrow-body airplane would be more like $10 billion to develop. Now we're looking at $20 billion, $30 billion.

00:03:08 Speaker_04
Our first witness is aviation consultant Scott Hamilton, who has been following the industry for more than 30 years. He says that when it was founded, Boeing was just one of many companies getting into the new world of aviation.

00:03:25 Speaker_03
It was founded in 1916 by William Boeing in the Pacific Northwest in Seattle. Bill Boeing earned his fortune by logging. And back in 1916, aviation was only 13 years old, you know, the Wright brothers.

00:03:41 Speaker_03
had their first flight in 1903, and just a wide number of companies started developing airplanes. And Bill Boeing saw the potential and started building airplanes.

00:03:52 Speaker_04
Its first big seller was the sleek Boeing 247, the first plane to have a single wing mounted underneath the fuselage, the kind of airplane shape we used to today.

00:04:04 Speaker_04
It was launched in 1933 and broke an airspeed record by flying from San Francisco to New York in 19 and a half hours, a stunning achievement at the time.

00:04:16 Speaker_04
But it was the launch of the Boeing 707 in 1957, which used jet engines rather than propellers, that kicked off the company's glory years.

00:04:26 Speaker_03
You could get across the United States in five hours instead of eight hours. You could get transatlantic even with a refueling stop in Newfoundland.

00:04:34 Speaker_03
And then when the range is improved enough to be nonstop transatlantic, then ultimately trans-Pacific nonstop service, it was just a revolution for the airlines. It was a revolution for the passengers.

00:04:47 Speaker_04
And then in 1969. The Boeing 747 Jumbo Jet, a 350 ton elephant with wings.

00:04:56 Speaker_03
The 747 was about three times the size of the 707. It was a twin aisle airplane. It also allowed the airlines to sharply lower their airfares because they were now carrying over 350 people versus 120 people.

00:05:13 Speaker_03
There was really a spike in passenger travel as a result.

00:05:19 Speaker_04
For much of the 20th century, Boeing dominated the civil aviation industry. But in 1970, European manufacturers got together to form Airbus.

00:05:29 Speaker_03
The European aerospace companies, Britain, France, and Germany predominantly, but Spain was thrown in there as well, decided that we need to consolidate into one to be an effective global competitor. And that's how Airbus was created.

00:05:44 Speaker_03
Boeing arrogantly dismissed Airbus as just another European jobs program in an aerospace industry where they were never successful.

00:05:53 Speaker_04
But they were in for a shock when Airbus managed to move in on the American market.

00:05:58 Speaker_03
In 1992, Airbus landed an order with America's United Airlines, and it had been an exclusive Boeing customer up to that point, and that was the wake-up call for Boeing that Airbus was in fact a serious competitor.

00:06:15 Speaker_04
In 1997, Boeing merged with US rival McDonnell Douglas, McDonnell Douglas had been struggling to compete with the Boeing Airbus duopoly, and Boeing could make good use of its surplus factory capacity.

00:06:29 Speaker_04
But the merger brought with it a change in corporate culture that many people say was the beginning of the problems Boeing faces today.

00:06:37 Speaker_03
Observers and critics will say that it was that merger and the arrival of a McDonnell Douglas CEO who brought in the whole idea that instead of focusing on engineering, Boeing should be focusing on profits and shareholder value.

00:06:52 Speaker_03
Cost cutting at Boeing became an obsession. And when you start cutting to the quick and you cut to the bone, safety is going to be one of those things that just happens to be a byproduct of that obsession.

00:07:09 Speaker_09
The idea that Boeing was a company of Boy Scouts and along came the hunter-killer assassins of McDonnell Douglas and turned the good guys into bad guys is a bit ludicrous.

00:07:23 Speaker_04
Our second witness is Christine Negroni, an aviation journalist specialising in safety. She argues that Boeing had significant issues with its planes before the merger, but that the merger served to exacerbate them.

00:07:38 Speaker_09
I think the company was already ready to adopt that kind of behaviour when McDonnell Douglas came along. McDonnell Douglas, I think, put them on steroids.

00:07:48 Speaker_04
And those problems with safety became painfully evident in the 2010s, when it came to developing a new plane to stave off the competition from Airbus.

00:07:57 Speaker_00
Welcome to the first flight of the Boeing 737 MAX 8.

00:08:02 Speaker_04
Boeing could have chosen to design a new aircraft from scratch, and indeed it had one in the pipeline. But instead, it chose to upgrade its classic 737, which by then was almost 50 years old, and call it the 737 MAX.

00:08:18 Speaker_09
It's an airplane designed originally in the 1960s. A pilot who flies the 737 Max, who I interviewed for several stories, says this is what happens when you put Tesla technology on a 1967 Volkswagen. And that's exactly what Boeing decided to do.

00:08:36 Speaker_09
It didn't want to spend the money to develop an airplane from the ground up because it was worried about competition from Airbus. So it took this old pig and shoved a lot of lipstick on it.

00:08:52 Speaker_04
The 737 MAX's limitations became horribly clear in 2018, when a Lion Air flight from Jakarta, Indonesia crashed soon after take-off, killing everyone on board.

00:09:03 Speaker_04
The MAX was fitted with bigger engines than previous 737 models, and these had to be mounted further forward and higher on the wings. That changed the way the plane flew and put it at risk of pitching too far upwards, especially at low speeds.

00:09:21 Speaker_04
Software was installed in the flight management system that would compensate for that and allow the planes to feel the same to pilots as the older 737s did. The problem was that it behaved in a way that the pilots didn't understand.

00:09:38 Speaker_09
One of the consequences of that was that if the airplane went too nose up, the software would kick in and push the nose back down.

00:09:47 Speaker_09
And it did not notify the pilots that this would happen, believing that regular training would make them realize what was wrong and they'd fix it. Well, that didn't happen.

00:09:56 Speaker_09
The pilots were confounded and the plane repeatedly went nose down despite the pilot's effort to correct until it went nose down right into the ocean.

00:10:08 Speaker_04
Boeing was slow to react to the Lion Air crash, blaming it on pilot error. It issued guidance to pilots about how to deal with the problem, and started work on a fix.

00:10:19 Speaker_04
But that would take months to develop, and in 2018, before it had been able to release it, the same thing happened to a 737 MAX Ethiopian Airlines flight shortly after take-off from Addis Ababa.

00:10:35 Speaker_00
Rescue teams searched through the wreckage of an Ethiopian Airlines plane that crashed shortly after takeoff, killing all 157 people on board. We're at the scene.

00:10:45 Speaker_09
It relied on this immediate assumption, pilots can handle this. Pilots could not. And that's what happened with Ethiopian. They had the same kind of problem. They were not over water, they were over land. The pilots were confused.

00:10:57 Speaker_09
They couldn't overcome the nose down command. And the plane went into the dirt.

00:11:03 Speaker_04
That second crash resulted in the grounding of 737 MAXs across the world, something that Boeing and the FAA, the US Federal Aviation Administration, initially resisted.

00:11:15 Speaker_04
And that, says Christine, highlights what she sees as Boeing's unwillingness to take safety as seriously as it should.

00:11:23 Speaker_09
The expectation is that when a manufacturer of any product, but specifically of airplanes, claims it has foreseen all of the potential threats and remedied them, that it actually has.

00:11:38 Speaker_09
When they talk about a software system that could seize control of the aircraft from the pilots, that they will have told the truth. when they said, no, no, this won't be a problem.

00:11:50 Speaker_09
But in every single one of those cases, Boeing claimed to have anticipated the problems, knew about the problems, and did not resolve them.

00:12:01 Speaker_04
Christine says cost-cutting had also put pressure on the company to turn out aircraft too quickly to maintain the sort of quality control that was required.

00:12:11 Speaker_09
The manufacturing of Boeing products was terribly rushed, not being done correctly, under tremendous pressure that people did not feel free to talk about problems they were encountering on the line. It put the onus of this squarely on Boeing.

00:12:29 Speaker_09
There was no way around it this time.

00:12:32 Speaker_04
Then this year, when Boeing thought its safety issues were no longer in the spotlight, a door plug blew out of an Alaska Airlines 737 Max, flying over Portland, Oregon in the United States.

00:12:45 Speaker_09
The Alaska Air event wasn't about software, it was about manufacturing.

00:12:50 Speaker_09
And so in one respect, what happened in Alaska was a big assist to making us recognize around the world that Boeing's problem is not just about design, it's not just about pilot training, it's about the company itself.

00:13:07 Speaker_04
Boeing's CEO has admitted that trust in the company has been eroded and that there have been serious lapses in its performance. And he says a fundamental culture change in Boeing is needed.

00:13:18 Speaker_04
2024 brought financial and employee issues to the forefront, but those had to go side by side with the issues of safety.

00:13:31 Speaker_02
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00:13:44 Speaker_01
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00:13:56 Speaker_10
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00:14:19 Speaker_04
The Ethiopian Airlines crash led to a 20-month grounding of all 737 MAX aircraft worldwide, which cost Boeing about US$80 billion in fines, compensation payments and cancelled orders.

00:14:42 Speaker_04
Add to that the loss of revenue caused by the COVID lockdown, which essentially paused aviation for a year and a half. And by the beginning of this year, the company was in a dire financial situation.

00:14:54 Speaker_06
Either one of those events would have had a profound impact on the company, the employees, the financial picture, the supply chain.

00:15:02 Speaker_06
And so the one-two punch of the max groundings and then COVID was something that the company very much still feels today.

00:15:10 Speaker_04
Our third witness is Sharon Turlap, an aviation industry reporter at The Wall Street Journal.

00:15:19 Speaker_06
You have a massive global manufacturing operation that has stopped not once but twice. So they lost a ton of talent from factory workers to engineers. A supply chain, when it stops, that's incredibly destructive.

00:15:35 Speaker_04
And if that weren't enough, even after the grounding was lifted, the Federal Aviation Administration put the company into a probation period which limited the number of 737 MAX planes it was allowed to produce each month.

00:15:50 Speaker_06
The FAA set a cap with the idea that if they're producing too many, they may run into quality problems.

00:15:57 Speaker_04
That was due to end at the beginning of this year. But

00:16:01 Speaker_06
The same week that the door plug blowout happened was the week that Boeing was supposed to come off the probation, and as a result, that wasn't lifted. Strike!

00:16:13 Speaker_07
Strike! Strike!

00:16:17 Speaker_04
To make matters even worse, in September this year, more than 33,000 machine workers, mainly at Boeing's plants in Seattle in the northwest United States, went on strike, halting aircraft production entirely.

00:16:31 Speaker_06
If they're not producing and delivering planes, they're not making money. It's resulting in quite a large cash burn. I mean, they burn through about a billion a month through the first nine months of this year.

00:16:45 Speaker_04
In October, Boeing managed to raise US$21 billion by issuing new shares in the company, which has bought it some time. And its new CEO, Kelly Ortberg, is working hard to rebuild relationships between management and workers.

00:17:01 Speaker_04
At the beginning of November, he managed to bring the machine workers' strike to an end. And there's hope that he'll be able to restore Boeing's reputation for quality control.

00:17:13 Speaker_06
Kelly Ortberg came up through a supplier. So he didn't come up through finance or marketing. He has a reputation for spending a lot of time really in engineering labs at the factories. And from what I understand, that is genuine.

00:17:26 Speaker_06
That's his management style. It's also something the company is very intentionally projecting as a message.

00:17:33 Speaker_06
because a lot of the criticism about prior management has been that Boeing had become too far-flung, its management too hands-off, not connected enough to engineering.

00:17:43 Speaker_06
So they're definitely playing up the fact that Kelly Ortberg is someone who knows how a factory runs, knows intimately how an airplane works, and is really getting in there.

00:17:53 Speaker_04
And it does look like Boeing's customers, the airlines, will stick with it. Though to be honest, it's not that they have that much choice. Airbus's order books are full into the 2030s.

00:18:05 Speaker_06
Boeing, in its messaging, say, look, it's not like we need to go out and find buyers for our planes. We have this huge order backlog. It's just a matter of making the planes and delivering them.

00:18:16 Speaker_06
And the buyers are there, particularly with billions of dollars in orders and all this demand and only one competitor. I don't think anybody thinks Boeing's going out of business. It's hard to imagine Boeing going away.

00:18:35 Speaker_03
Part four, can anybody challenge the big two?

00:18:44 Speaker_04
That one competitor is, of course, Airbus. But how secure is that Boeing-Airbus duopoly that has dominated civil aviation for the last 50 years?

00:18:55 Speaker_04
One possible challenger is the state-owned Chinese aviation company Comac and its 160-seat C919 passenger jet.

00:19:04 Speaker_05
The C919 is meant as basically a duplicate of the workhorse jets that Boeing and Airbus build, the 737 and A320.

00:19:13 Speaker_04
Our fourth witness is Richard Aboulafiou, managing director at Aerodynamic Advisory, a US aerospace consulting firm. On paper, he says, the C919 should be making Airbus and Boeing worried.

00:19:28 Speaker_04
But in practice, it's much less of a threat than it seems, as it's relying on out-of-date technology.

00:19:36 Speaker_05
China is not short of qualified engineers. They should be doing great. The only way to mess it all up is to do exactly what they're doing, which is to mandate technology transfer with no intellectual property protection.

00:19:50 Speaker_05
So basically what happens is their jets are composed of systems, engines, technologies, et cetera, that are basically sold to them by Western companies. They're showing up with their latest and best from 15, 20 years ago.

00:20:05 Speaker_05
That might change, of course, but Richard thinks that's unlikely.

00:20:09 Speaker_05
If China were to say tomorrow, we're going to let our engineers go shopping for the best systems and components in the world, just like Airbus and Boeing do, I think Airbus and Boeing would be petrified.

00:20:19 Speaker_05
But of course, that's not exactly what President Xi has in mind for China's future.

00:20:24 Speaker_04
Elsewhere, though, there are other aircraft manufacturers who could move into Airbus and Boeing's market. One of these is Brazilian aircraft manufacturer Embraer, which ironically Boeing considered buying a few years ago.

00:20:39 Speaker_05
The big talk at the Farnborough Air Show outside of London this year was, will Embraer get into the big leagues? Right now, its biggest jet is about 120 seats, kind of somewhere between regional and mainline. But Embraer is a deeply respected company.

00:20:54 Speaker_05
If they were to ally with people with deep pockets, and they need very deep pockets, and they were to get into Airbus and Boeing territory, they'd be amazing.

00:21:03 Speaker_04
And then there are companies designing completely new types of aircraft, such as Jet Zero, based in Long Beach, California, in the US. It is developing a plane that's essentially a huge wing with a body in the middle of it.

00:21:17 Speaker_04
That would reduce drag and make it much more fuel efficient.

00:21:21 Speaker_05
That would allow a double-digit improvement in fuel burn and in emissions reduction. But again, the issue is money. The problem is that we'd need people to come along with $15 or $20 billion to make this happen.

00:21:40 Speaker_04
All of that, he says, means that for the time being, Boeing is pretty safe from outside competition, except, of course, from Airbus. And Richard is encouraged by the recent changes in Boeing management.

00:21:52 Speaker_05
For about 15, 20 years, they were led by people who had extremely little interest in the core business of building aircraft, pure and simple. They were led by people who were comfortable playing with financial abstractions and really nothing else.

00:22:08 Speaker_04
Boeing says it is dedicated to putting safety first. In a statement, it said,

00:22:14 Speaker_07
Boeing has listened to its employees, engaged transparently with its regulator and invited scrutiny from customers and independent experts.

00:22:22 Speaker_07
We have a comprehensive plan to strengthen our safety management, quality assurance and safety culture so it continues delivering safe, high-quality aeroplanes.

00:22:33 Speaker_04
That's something that Richard welcomes, of course. But, he says, the company still has a long way to go to restore its fortunes.

00:22:40 Speaker_05
I try to be optimistic about this. I'd like to see them come back and restore the health of the duopoly, maybe even with their historical 50% market share. It's just going to take a great deal of work.

00:22:57 Speaker_04
So to return to our question, can Boeing turn itself around? Well, one thing's for sure. Boeing isn't going to go bust. It's just too big an entity for anyone to allow that to happen. but it has a big task ahead of it.

00:23:13 Speaker_04
Catching up on all that lost production will take time and money, and financially, the company is nowhere near out of the weeds.

00:23:23 Speaker_04
But even more importantly, it will need to convince its customers, the airlines, and us, the people who fly on its planes, that it has restored its commitment to safety. A final word from our first witness, aviation consultant Scott Hamilton.

00:23:41 Speaker_03
Statistically, Boeing is still a very safe company. You know, a Boeing airplane takes off somewhere in the world every couple of seconds, and they just don't crash very often. They really don't.

00:23:57 Speaker_04
This episode of the Inquiry was presented by me, David Baker. The producer was Bob Howard, researcher Matt Toulson, studio production was by David Krakles, and the editor is Tara McDermott.

00:24:20 Speaker_02
World of Secrets is where untold stories are exposed. And in this new series, we investigate the dark side of the wellness industry, following the story of a woman who joined a yoga school only to uncover a world she never expected.

00:24:34 Speaker_01
I feel that I have no other choice. The only thing I can do is to speak about this.

00:24:40 Speaker_10
where the hope of spiritual breakthroughs leaves people vulnerable to exploitation. You just get sucked in so gradually and it's done so skillfully that you don't realise.

00:24:54 Speaker_02
World of Secrets, The Bad Guru. Listen wherever you get your BBC podcasts.