The decline of Boeing

Problems keep mounting for the Boeing aircraft company. In 2019, there were two crashes in quick succession of the new Boeing 737 Max aircraft that killed 346 people and resulted in the entire fleet of that model being grounded from March 2019 to November 2020 for investigations and to fix the problem.

Investigations faulted a Boeing cover-up of a defect and lapses in the FAA’s certification of the aircraft for flight. The accidents and grounding cost Boeing an estimated $20 billion in fines, compensation and legal fees as of 2020, with indirect losses of more than $60 billion from 1,200 cancelled orders. In 2021, Boeing also paid US$2.5 billion in penalties and compensation to settle the DOJ’s fraud conspiracy case against the company. Further investigations also revealed that the FAA and Boeing had colluded on recertification test flights, attempted to cover up important information and that the FAA had retaliated against whistleblowers.

Then last week, a panel of the fuselage ripped out of a brand new 737 Max plane operated by Alaskan Airways just after it took off and was ascending to cruising altitude. Fortunately there were no casualties and the plane landed safely but the fleet was grounded again to see what might be the problem.

United Airways said that their inspections revealed ‘loose bolts’ and other installation issues on multiple aircraft.

United Airlines has found loose bolts and other “installation issues” on multiple 737 Max 9 aircraft, it said on Monday, referring to the Boeing model that has been grounded after a panel blew off an Alaska Airlines-operated plane mid-flight over the weekend.

“Since we began preliminary inspections on Saturday, we have found instances that appear to relate to installation issues in the door plug. For example, bolts that needed additional tightening. These findings will be remedied by our Tech Ops team to safely return the aircraft to service,” United said in a statement.

On Monday evening, Alaska Airlines released a statement indicating that maintenance technicians had found issues when inspecting their 737 Max 9 fleet. “Initial reports from our technicians indicate some loose hardware was visible on some aircraft,” the statement said.

At one time, Boeing had an excellent reputation for producing safe and reliable aircraft. So what happened? Andrew Cockburn had a lengthy article back in the June 2019 issue of Harper’s Magazine titled THE MILITARY- INDUSTRIAL VIRUS: How bloated budgets gut our defenses where he explained that what happened at Boeing was that the slipshod culture that is endemic to US military procurement seeped into the civilian aircraft production system.

Of course, some sections of postwar U.S. manufacturing indebted to defense dollars still led the world, most notably civilian aircraft as represented by the Boeing Company. The airliners that rolled out of its Seattle plant were well designed, safe, and profitable. Boeing had a huge defense component as well, but senior management reportedly enforced an unwritten rule that managers from the defense side should never be transferred to the civilian arm, lest they infect it with their culture of cost overruns, schedule slippage, and risky or unfeasible technical initiatives.

That began to change in 1997, when Boeing merged with McDonnell Douglas, a defense company. In management terms, the merger was in effect a McDonnell takeover, with its executives—most importantly CEO Harry Stonecipher—assuming command of the combined company, bringing their cultural heritage with them. The effects were readily apparent in the first major Boeing airliner initiative under the merged regime, the 787 Dreamliner. Among other features familiar to any student of the defense industry, the program relied heavily on outsourcing subcontracts to foreign countries as a means of locking in foreign buyers. Shipping parts around the world obviously costs time and money. So does the use of novel and potentially risky technologies: in this case, it involved a plastic airframe and all-electronic controls powered by an extremely large and dangerously flammable battery. All this had foreseeable effects on the plane’s development schedule, and, true to form for a defense program, it entered service three years late. This technology also had a typical impact on cost, which exceeded an initial development estimate of $5 billion by at least $12 billion—an impressive overrun, even by defense standards. Predictably, the battery did catch fire, resulting in a costly three-month grounding of the Dreamliner fleet while a fix was devised. The plane has yet to show a profit for the corporation, but expects to do so eventually.

The two recent crashes of the Boeing 737 Max, which together killed 346 people, were further indications that running civilian programs along defense-industry lines may not have been the best course for Boeing. The 737 had been a tried and true money-spinner with an impressive safety record since 1967. Several years ago, however, under the auspices of CEO Dennis Muilenburg, previous overseer of the Future Combat Systems fiasco, and Patrick Shanahan (currently the acting secretary of defense), who had headed up Boeing’s Missile Defense Systems and the Dreamliner program before becoming general manager of Boeing’s commercial airplane programs, the airliner was modified in a rushed program to compete with the Airbus A320. These modifications, principally larger engines that altered the plane’s aerodynamic characteristics, rendered it potentially unstable. Without informing customers or pilots, Boeing installed an automated software Band-Aid that fixed the stability problem, at least when the relevant sensors were working. But the sensors were liable to fail, with disastrous consequences. Such mishaps are not uncommon in defense programs, one such instance being Boeing’s V-22 Osprey troop-carrying aircraft (supervised for a period by Shanahan) in which a design flaw, long denied, led to multiple crashes that killed thirty-nine soldiers and Marines. But the impact of such disasters on contractors’ bottom lines tends to be minimal, or even positive, since they may be paid to correct the problem. In the commercial market, the punishment in terms of lost sales and lawsuits are likely to be more severe.

If these disasters involving civilian aircraft continue, then Boeing will lose customers to other manufacturers. The problem is that once the wall between defense and civilian practices is breached, it is hard to repair it. The defense culture of shoddy design and manufacture and huge cost overruns carries with it little downside since the people who die are military pilots and crew and people (other than the crew members’ families) tend to view them as part of the risks of being in the military, and cost overruns are simply paid for by the government. That drive to make money by cutting corners is hard to get rid of.


  1. raven says

    Boeing to move headquarters from Chicago to Virginia

    CNBC › 2022/05/05 › boeing-to-move-h…

    May 5, 2022 — Boeing moved its headquarters to Chicago in 2001, leaving its Seattle home after 85 years following its 1997 merger with St. Louis-based rival …

    Another mistake Boeing made was moving their corporate headquarters from Seattle to Chicago after their merger.
    Seattle is where they were founded and where they still have extensive research, development, and manufacturing facilities. At one time, they were one of the main employers in the Seattle area.

    This showed that the company was leaving its engineering history behind and being run by corporate suits who knew “business” but didn’t know a lot about research, development, and manufacturing jet planes.

    They are now moving their corporate headquarters to Arlington, Virginia, which happens to be where the US military has its Pentagon headquarters.
    It looks like they are far more interested in their defense business than making civilian aircraft.

  2. says

    It’s strange how these things turn around. Back in the 1970s I worked in a calibration lab. As part of the routine, a second person would double check your calibration. A common joke was that second person saying “Well, it’s good enough for government work” in a sarcastic tone. Of course, everyone knew that government standards were very high and strict, so treating them is if they were second rate was the joke.

    I don’t think for a moment that the engineers and technicians who design and build defense systems are not talented or are sloppy. It’s just that the system prioritizes things like “performance candy”, basically, “eye candy” specs. Oooo, this plane can fly backwards at mach 2? Great! We need that! We didn’t know that we needed that this morning, but now that you mention it… So-called “cutting edge” tech is also derisively referred to as “bleeding edge” tech. It’s expensive and touchy. You combine that with current capitalist desires, and what you get is unsurprising.

  3. Sunday Afternoon says

    @jimf: I moved to the US in the late ’90s and by then “close enough for government work” had lost all understanding of the joke. In the usage I encountered it was justification for doing a poor job.

  4. Deepak Shetty says

    . The problem is that once the wall between defense and civilian practices is breached, it is hard to repair it.

    I dont know if thats the only reason though -- you can see this happen in all places , even without the defense factor. I feel its more the as much profit at all costs with unreasonable growth expectations type of unbridled capitalism. The biggest sin is leaving money on the table.
    It never ceases to amaze me that if a company makes say 10 Million profit this year and then makes 10 million profit again next year , it is deemed a failure(no growth!).

  5. JM says

    @5 Deepak Shetty: The big airplane companies also have the problem of market saturation. They can’t sell many more planes, there are only so many buyers and they only need so many big passenger planes. The market is effectively an oligopoly, national governments would step in if it looked like a single company was going to control the market. Increasing profits through expanded sales or improved products is limited, at some point cutting expenses becomes the option for managers concerned only with profits in the next quarter.

  6. says

    I would suggest a larger challenge. As just two examples, consider how we got the General Motors Corvair and the Ford Pinto and what happened when cost-benefit analysis involves human lives and corporate profits.

  7. John Morales says


    Passenger planes manufacturers that are not niche.

    Boeing and Airbus.

    And, um, Boeing is on the nose, as this very post demonstrates.

    One of them would be the better bet for investment, were it not for the USA military-industrial complex.

    (Market distortion? Oh my!)

  8. jenorafeuer says


    At one time, they were one of the main employers in the Seattle area.

    One of? When I worked at Microsoft as a co-op student back in the late 1980s, it was my understanding that Microsoft was the second largest non-government employer in the state of Washington… with Boeing being the only one bigger.

  9. sonofrojblake says

    Right now, with Boeing having been found to have covered up engineering failures, I’d give the serious side-eye to any airline that bought or leased or whatever any plane built by them. As in, I’d assume someone had been bribed. While there’s an alternative supplier of the product that hasn’t been proven to have been covering up such engineering and maintenance failures, there’s simply no justification for buying from a company that has, other than “they bought me a yacht, where do I sign?”.

    In any rational world, Boeing would already be going out of business. As it is, they’ll be supplying substandard stuff to the Army, Air Force and others for decades to come. Hooaah.

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