The Boeing 737 Max aircraft was to be the most successful plane in the history of Boeing. The latest update to the 737 lineup, the Max was an instant hit with over 5,000 orders totaling billions of dollars in revenue for the company. Within months of the first planes being delivered, the Max was being used by over 50 carriers and averaging 8,600 flights a week.
This all was abruptly halted when in October 2018, the first 737 Max plane crashed without indication of external contributions. Five months later, another 737 Max plane crashed under similar circumstances to the first, causing worldwide groundings and investigations launched by governments across the globe. The question on everyone’s mind: How did one of the most successful aerospace companies in the world create such a flawed plane? The question it turns out, has a complex answer.
Founded in 1916, Boeing has dominated the aerospace industry and achieved a near duopoly with its competitor Airbus. The company is the largest US exporter by dollar value, the fifth-largest defense contractor worldwide, and a key driver of the Dow Jones Industrial Average. There is no doubt that Boeing is a global powerhouse, but the commercial aircraft business is a very competitive industry requiring constant innovation. Boeing realized it needed to innovate but saw an opportunity to update their existing aircraft lineup instead of developing a brand-new airframe. Not only does this save on research and development costs but having the new 737 operate on a similar system to the previous model allowed for airlines to start flying the new planes with minimal training for its pilots. A 1-hour iPad training session to be exact.
In many circumstances, this would have not been much of an issue as past upgrades to the 737 airframe were very minimal in the changes added to the aircraft. However, to achieve the efficiency goals they had for the new plane, Boeing installed much larger fan engines on the aircraft which drastically altered the aerodynamics of the plane and created a higher probability for the plane stalling during flight. To counter this, Boeing installed a small software system called the Maneuvering Characteristics Augmentation System (MCAS). The system was designed to monitor the position of the aircraft in the air and if it detected a risk of stalling, utilize the planes flaps to level out the nose and keep the plane flying normally.
The system had flaws. The main one being that many pilots were not aware it was even implemented within the aircraft design. The second being that the system could malfunction. These malfunctions were easily dealt with if pilots realized what was happening, the system could just be switched off. However, if the pilot did not know of the MCAS system and it malfunctioned, the pilot and the plane would fight each other until the aircraft stalled and fell to the ground. Through investigations, this was deemed to be the cause of the two horrific crashes that killed 346 people.
Until these crashes, the 737 Max was unequivocally Boeing’s most successful plane to date. The fallout since has put the 103-year-old company in jeopardy. The financial impacts were immediate, with an estimated $7.3 billion in costs due to groundings along with airlines demanding compensation and a $100 million set aside as a fund for the victim’s families. Associated costs are only expected to rise as the fallout continues and more investigations continue to uncover concerning practices with the development and approval of the aircraft. Investigations have found that the bulk of regulatory and safety approval for the aircraft, usually done by the Federal Aviation Administration, was outsourced to Boeing’s own engineers.
Boeing has since had revenue losses every quarter and numerous companies have cancelled or tried to cancel existing orders for the aircraft. Saudi Arabian budget airline Flyadeal rescinded its order for 50 aircraft and switched to Airbus for the planes it needs. This is a trend that will likely continue with other airlines as the pressure from the 737 Max groundings starts to hurt their bottom line.
It is unknown when the aircraft will return to the air and unlikely it will happen all at once. Each country operates their own regulations and it is unclear if many want the Max flying in their airspace regardless of changes. It is also unclear if passengers will want to fly on a 737 Max in the future putting even more pressure on the airlines to find a solution. The problems seem to continually pile up and it begs the question can Boeing recover from this setback? In the short-term, their only course of action is the fix the plane and get new regulatory approval for the Max to re-enter operation.
The long-term solution is the one that could cause ongoing problems for the company. The commercial aircraft industry is dominated by Boeing and Airbus with the latter capitalizing on the recent turmoil and taking large chunks of the market share away from Boeing. If airlines only have two options for a plane, and one is known to have systematic flaws, they will turn to the safer option. Boeing has a lot of work ahead of it and will likely be dealing with the fallout of these problems for years. Only time will tell if Boeing can come out on the other side of this and still be the dominant player in this industry. In the meantime, they must get to work rebuilding the customer and regulator confidence they had worked so hard to develop over the past century.