It has been getting harder for staff to find parking spaces at Boeing’s Renton plant outside Seattle. For much of this year, the world’s largest aircraft manufacturer has been using the employee car park to store planes which it cannot deliver.
Renton is home to the 737 Max, the latest model of the best selling commercial jet in history. Since two fatal crashes prompted global regulators to ground the entire Max fleet in March, the plant’s 12,000 people have been confronted each day they arrive for work with hulking reminders of the biggest crisis in Boeing’s 103-year history.
The company has been producing 42 Max jets a month, even while it could not send them on to customers, leaving it with 400 “white tails” — finished planes awaiting airline liveries — in need of novel storage solutions.
They will soon have more room, after Boeing announced this week that it is halting production at Renton for an indefinite period. Employees will be parking at other nearby Boeing facilities where the $188bn company has promised to find them work.
Dennis Muilenburg, Boeing’s engineer-chief executive, had hoped the Max would be flying again by this summer, yet analysts now think it will not return until March 2020 at the earliest — almost 18 months after the first of two crashes, in Indonesia and Ethiopia, that killed 346 people. But even that might be optimistic — United Airlines said on Friday that the Max would not return to its fleet until June.
The crisis has not only cost America’s largest exporter billions of dollars: it has challenged many of the global aviation industry’s core assumptions about the political, regulatory and competitive context in which it operates.
Boeing’s announcement left employees who had feared lay-offs relieved, but it rattled suppliers who will find it harder to replace work lost during any prolonged interruption to orders.
With its shares down almost a quarter since March, and economists estimating that the disruption could shave half a percentage point off US gross domestic product in the first quarter of 2020, its troubles have also caught the attention of the passenger of its best known plane, Air Force One. Donald Trump reportedly called Mr Muilenburg on Sunday to ask about the company’s health highlighting that in election year the president will be weighing Boeing’s economic impact against his voters’ safety fears.
Boeing’s failure to put the Max crisis behind it has baffled even experts who have studied corporate crises, from Johnson & Johnson’s 1982 Tylenol pain relief recall, to BP’s Deepwater Horizon environmental disaster in 2010.
The drawn-out saga has few parallels, says Eric McNulty, associate director of the National Preparedness Leadership Initiative, but he believes it stems from “tone-deaf” management and an inability to understand that Boeing’s world was changing even before the pride of its fleet proved fatally flawed.
When questions first arose about the role its MCAS anti-stall system played in the Max crashes, Mr McNulty argues, the company’s first reaction was to think “we’re Boeing; this can’t be happening to us”; it failed to question potential failings in its culture, its close relationship with its domestic regulator or its fast-changing market.
“When you have a worldview that makes sense it’s almost impossible to break out of it,” he adds: “The system made perfect sense until it didn’t.”
Boeing is accused of producing a flawed design for the MCAS system, which pushed the nose of the plane down when sensors detected it was about to stall. But Boeing opted to use one instead of two sensors to deliver that crucial data to the flight control system, leaving it exposed if the remaining sensor was defective. Compounding the problem, Boeing lobbied to keep information on the system out of the manual to avoid costly pilot training, arguing that crew should be able to handle the system from existing checklists.
One analyst, a former aerospace engineer, says: “I don’t think they think they did anything wrong. They think they designed an aeroplane that was fine and this never would have happened if they had pilots who knew what they were doing . . . Deep down inside they think they are being picked on.”
If Boeing has been blindsided by the hostile response to its predicament, that is partly because its status as one of America’s most politically significant companies has offered it surprisingly little protection. With plants dotted around the country, the company donated $4.2m to politicians of all stripes from 2016 to 2018. It also gave $1m toward Mr Trump’s inauguration.
But if it hoped such patronage would shelter it, it was mistaken. Boeing does not face insurmountable technical problems, says Richard Aboulafia, vice-president of aviation consultancy Teal Group. Instead, “it’s a hideous mix of political pressure, messaging incompetence and regulatory misalignment” that is confronting the company.
In the view of one former supplier who asked not to be named, its problems with the Max began when the Federal Aviation Administration let it “ram through” alterations to a 737 design which was first certified in 1967, rather than face the more arduous approval process for an entirely new aircraft.
As House of Representatives and Senate committee members have learnt how keen Boeing was to avoid having the Max classified as a new jet, rather than an update of an old one, they have taken a tougher tone in questioning Mr Muilenburg and other executives.
The House transportation committee wants to find out who was pushing regulators to minimise how much training pilots would need on the Max. With 500,000 documents to review, its investigation has months to run.
“There is clearly a cultural issue at Boeing,” says one congressional official. “It is going to take a lot of things to turn this company around — a new leadership, and possibly a fresh perspective.”
Much of the scrutiny Boeing has faced on Capitol Hill has focused on a relationship with its domestic regulator that many now paint as excessively cosy. An official report from representatives of the FAA, Nasa and seven regulators, concluded that the FAA’s practice of delegating many of the steps required to certify an aircraft to Boeing’s own staff had created “conflicting priorities”.
Under fire, the FAA has appeared determined to demonstrate its distance.
Where once the regulator might have accepted Boeing’s reassurance that its aircraft were airworthy, now it is “reasserting itself”, Mr Aboulafia says.
The manufacturer’s timetable for getting approval for the Max to fly again was “not realistic”, the FAA said last week, reprimanding Boeing for appearing to try to “force” it into moving faster.
The FAA is not Boeing’s only concern. Despite a tradition of domestic regulators taking the lead in such decisions, China was the first country to ground the Max and the FAA’s international peers have all demanded a say in the process for getting it airborne again.
Authorities ranging from the European Aviation Safety Agency to Canada’s civil aviation body have peppered Boeing with questions. The FAA’s hopes of avoiding a piecemeal return to service have required unprecedented co-ordination with peers, which some in the US industry see as eager to challenge its standing as the leading regulator.
Their suspicions have been fed by other tensions between Washington and its trading partners. Mr Trump’s tariffs have sharpened competition with China, while the US recently won World Trade Organization backing for its case that the EU has provided unfair subsidies to Airbus, Boeing’s European rival.
Despite this win, one senior industry executive warns that “time is against Boeing” because the Max crisis may have set back the planned launch of its “new midsized aeroplane”, by three years. The popularity of Airbus’s recently launched A321XLR and re-engineered A330neo could leave little of the mid-market for it to go after, he says.
For now airlines faced with an effective duopoly between Boeing and Airbus cannot afford for either to fail. “The market needs [Boeing] to recover,” the executive says.
Despite the discomfort Mr Muilenburg showed while being grilled in October’s congressional hearings, many still expect Washington to temper its urge to punish the national champion.
“Boeing will receive all the support it needs to recover from airlines, the government, the agencies,” the executive says. “Boeing was too optimistic and arrogant in the way it predicted the aircraft would fly again but the FAA and EASA will authorise the 737 to fly again.”
If Boeing has had to rethink its assumptions about Washington and the wider regulatory environment, it has had to do the same with its planes.
The company faced angry reactions when it suggested earlier in the year that its errors with MCAS had been just one link in a “chain of events” but the pilot error at which it hinted remains a concern for manufacturers and regulators.
As the industry’s growth forecasts depend on emerging markets, Boeing faces the need to reassess its different pilot training programmes. That will mean building more technological safety nets into cockpits, and a level of automation which it had resisted.
The Boeing board, for now, is trusting Mr Muilenburg to execute these longer-term shifts, even while leading the urgent work to return the Max to the skies and responding to challenges like the malfunction which prevented its Starliner astronaut capsule from reaching the International Space Station on Friday.
But the chief executive will have one eye on the planes sitting in the Renton car park. A 737 does not take well to being grounded: its tyres go flat, its electronics need retesting, and its engine must be turned over. Much like one of the cars at Renton, one employee says, “you’ve got to take it out for a spin”.
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Strikes at 2 more U.S. auto factories to start Friday as UAW ratchets up pressure
The United Auto Workers union is expanding its strike against U.S. automakers to two new plants, as 7,000 workers at a Ford plant in Chicago and a General Motors assembly factory near Lansing, Mich., will walk off the job at midday on Friday.
Union president Shawn Fain told workers on a video appearance Friday that negotiations haven’t broken down but Ford and GM have refused to make meaningful progress.
“Despite our willingness to bargain, Ford and GM have refused to make meaningful progress,” Fain said. “That’s why at noon eastern we will expand our strike to these two companies.”
“Not a single wheel will turn without us,” Fain said, adding that the 7,000 soon-to-be picketers are the “next wave of reinforcements.”
Stellantis, the third major automaker targeted by the union, and the maker of brands like Chrysler, Jeep and Dodge, was spared further action, as Fain said the company’s management has made significant concessions on things like a cost-of-living allowance and a freeze on outsourcing.
The Ford plant in Chicago makes the Explorer and Police Interceptor, as well as the Lincoln Aviator SUV.
The GM plant in Michigan’s Delta Township near Lansing manufactures large crossover SUVs such as the Chevrolet Traverse.
The two new plants join 41 other factories and distribution centres already seeing job action.
So far, the impact on Canada’s auto industry has been muted, as none of the idled factories are major users of Canadian-made components.
Edward Moya, a strategist with foreign exchange firm Oanda, says that despite the expanded job action, the strike seems to be nearing an “endgame” as the two sides are clearly making slow but steady progress.
“Yesterday, the UAW said they are targeting a 30 per cent pay raise, which is down from the 46 per cent they were asking for in early September,” he said. “Automakers have raised their offer to 20 per cent but were not offering much on retirement benefits. The longer this drags, the more both sides lose, so a deal should be reached in the next week or two.”
Airlines claim passenger safety at risk under new passenger rights rules
Aviation companies are making the pitch to Ottawa that stricter rules designed to boost customer compensation and improve service could put passenger safety at risk — an argument consumer advocates reject as “ridiculous.”
The push, made in regulatory submissions and meetings on Parliament Hill, comes on the heels of sweeping reforms to the passenger rights charter announced in April and currently being hashed out by Canada’s transport regulator before going into effect next year.
The changes appear to scrap a loophole through which airlines have denied customers compensation for flight delays or cancellations when they were required for safety purposes. The sector wants that exemption restored, and says it doesn’t want pilots to feel pressured to choose between flying defective planes and costing their employer money.
“We want our pilots to be entirely free from any financial consideration when they take a safety-related decision,” WestJet CEO Alexis von Hoensbroech said in a video chat from Ottawa this week, where he was meeting with federal ministers on the reforms. The Air Line Pilots Association raised similar concerns in a submission to the Canadian Transportation Agency.
“Regulation should never be punitive for safety decisions,” he said.
In the European Union, however, where rules and precedents comparable to the impending passenger rights charter are in place, flight safety remains uncompromised, advocates say.
“Did it make it less safe to fly in Europe? I don’t think so,” said Sylvie De Bellefeuille, a lawyer with the advocacy group Option consommateurs.
The EU code came into force nearly two decades ago, shored up by court rulings that require compensation even for trip disruptions caused by safety concerns, such as mechanical issues. No major accidents involving EU-registered planes have occurred in commercial aviation since 2015.
“It lays pretty ill in the mouth of the industry to say that if you … take away that excuse then we will therefore fly unsafe planes,” said John Lawford, executive director of the Public Interest Advocacy Centre.
“I’m surprised that they would have the chutzpah to say that.”
Air Passenger Rights advocacy group president Gabor Lukacs called the claim “ridiculous,” and NDP transport critic Taylor Bachrach also slammed the argument.
“It’s quite alarming that the airlines would suggest that if the government holds them to a higher standard of customer care, there’s going to be a risk to passenger safety,” Bachrach said in a phone interview from northwestern B.C.
Loopholes and exemptions
Organizations from Nav Canada to the International Air Transport Association — as well as Canada’s main pilots union — maintain that safety will be jeopardized unless delays due to malfunctions or mechanical issues are exempted from what the Atlantic Canada Airports Association called “punitive measures.”
Proposed changes under the Air Passenger Protection Regulations would not exempt flight disruptions that are caused by “normal … technical problems” from cash penalties given to customers.
However, “airport operational issues” or “hidden manufacturing defects” would be considered beyond the airline’s responsibility under the would-be reforms, most of which are still months away from being finalized.
The first phase of the overhaul comes into effect on Saturday, kicking off a more streamlined complaints process that currently creaks under the weight of more than 57,000 complaints.
That backlog has continued to mount despite a slowdown in filings, which can take up to two years for the regulator to process. The new system will be managed by “complaint resolution officers” — 40 have been hired, with 60 more expected to be trained over the next year, according to the agency.
Among the provisions slated to kick in next year are fees imposed on airlines by the regulator to recover some or all of the cost of handling those complaints. If a passenger files one due to a flight disruption or denial of boarding, the reformed rules put the onus on the airline to prove the move was for reasons outside its control, such as bad weather.
Airlines make the case that regional routes would be pricier for customers — or simply cancelled outright — as slim profit margins would tip into red ink amid higher costs from complaints and fees.
“That could potentially have an impact on regional connectivity and accessibility for routes that might not be as profitable,” said Jeff Morrison, who heads the National Airlines Council, which represents airlines including Air Canada and WestJet. “There’s always a trade-off.”
The average profit for large carriers amounts to less than $10 per passenger, said WestJet’s CEO.
“If we have to compensate the passengers, it’s thousands,” von Hoensbroech said, noting that WestJet’s average one-way ticket price hovers around $200. “You need many, many flights to recover.”
Advocates Lawford and Gabor Lukacs said the airlines’ warnings around routes to smaller or far-flung communities are tantamount to “blackmail,” while Bachrach framed the notion of pitting sturdier customer rights against regional flights as a “false choice.”
“If you’re cutting regional routes, we’re going to open the whole country for more competition,” Lukacs said, framing the potential scale-back as an opportunity for other airlines.
He suggested subsidies to support regional trips, whose fares have shot up over the past four years, even as ticket prices on busier routes fell.
Von Hoensbroech also said accountability for flight disruptions, including the cost burden, must be shared across the industry, not borne by airlines alone — an argument some advocates are receptive to, given the highly integrated nature global air travel that hinges on players ranging from baggage handlers to security and border agents to air traffic controllers.
The Canadian Transportation Agency is currently working on a draft of the new Air Passenger Protection Regulations, expected to be published this year before the new charter is implemented in 2024.
“The ultimate goal of air passenger protection shouldn’t be to get compensation to passengers; it should be to incentivize airlines to treat passengers better,” Bachrach said.
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