Challenges Plaguing Boeing: Unraveling the Enigmatic Solution

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Boeing worked hard for many years to become known as a trustworthy company worldwide. However, in less than six years, it has managed to destroy this reputation and now finds itself in a precarious position, facing an uncertain future.

Regulators, airlines, passengers, and even Boeing employees are extremely unhappy following a series of mid-flight incidents and a decline in the company's quality standards. Investors are also disappointed as Boeing's stock (BA) has dropped by 27% this year, making it the second worst performer in the S&P 500, just behind Tesla.

Boeing faced another challenge on Monday when a 787 Dreamliner traveling from Australia to New Zealand experienced a sudden drop mid-flight, resulting in injuries to several passengers. It is unclear if Boeing is at fault, as the company mentioned that they are still gathering information about the incident. This comes at a bad time for Boeing as they are already being investigated by federal authorities for a door-plug malfunction on January 5th.

Brian Jokat, a passenger on Monday's Latam Airlines flight, shared his experience with CNN. He mentioned being abruptly awakened when the plane started to descend rapidly, causing passengers to be thrown towards the cabin ceiling. In another interview with The Wall Street Journal, he compared the situation to a scene from The Exorcist where a girl flies off the bed and hits the ceiling.

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Passenger shares what pilot told him after plane's mid-air drop

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Boeing, within the past six years, has faced significant challenges. The company was found responsible for two fatal crashes resulting in the loss of 346 lives. In addition, Boeing has suffered financial losses amounting to tens of billions of dollars, paid billions in fines and settlements, and faced public scrutiny for repeated quality control issues. Despite these difficulties, Boeing has not resorted to legal action or bankruptcy proceedings like other companies might have done.

But Boeing is not any other company.

The Boeing 787 Dreamliner plane operated by LATAM Airlines experienced a sudden loss of altitude during a flight, causing a violent drop that resulted in injuries to many frightened passengers. The incident took place the day before the aircraft was seen parked on the tarmac at Auckland International Airport in Auckland on March 12, 2024. A photo of the plane on the tarmac was captured by Brett Phibbs of AFP.

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Boeing is in big trouble

Boeing is considered an untouchable American institution, appearing to be a private enterprise but essentially functioning as an aerospace utility. Surprisingly, it operates with minimal regulatory oversight, as the underfunded FAA relies on Boeing to regulate itself. This lack of oversight was evident when the FAA administrator expressed shock at Boeing failing half of its production facility audit.

In response to the audit results, Boeing issued a statement assuring that they are actively addressing the highlighted issues and working diligently to resolve them.

Boeing stated that they are making immediate changes and developing a comprehensive action plan to enhance safety and quality based on the FAA audit, quality stand downs, and expert panel report. They aim to rebuild customer and passenger confidence by taking transparent and significant actions.

Boeing is focused on ensuring safety and quality through proactive measures and transparency.

The company is often referred to as a duopoly rather than a monopoly because it competes globally with its European rival Airbus. However, this competition is not considered true as Boeing's main customers, airlines, cannot easily switch to Airbus if they are dissatisfied with Boeing. Pilots are trained and certified in one of the two aircraft manufacturers, making it difficult to switch once a choice is made.

Boeing holds a significant position in the American aviation industry, being deemed "Too Big to Fail." This means that Boeing is not as susceptible to market forces, such as consumer choice, that other companies must navigate to stay afloat. As a result, Boeing is essentially immune to being eliminated, even if there were a desire to do so by the public.

So, how can we address the issue with Boeing?

According to Gad Allon, a professor at the University of Pennsylvania’s Wharton School of Business, the first step for Boeing to rebuild trust is to essentially replace the entire C suite. Allon mentioned on Tuesday that while this may not actually happen, every executive with a C in front of their title bears some responsibility for the current situation at Boeing.

Allon isn’t holding his breath for Boeing’s board of directors on that front.

Another idea that’s occasionally bandied about: Nationalize Boeing.

Matt Stoller, who is the director of research at the American Economic Liberties Project, a progressive think tank, pointed out in a newsletter in January that the government has a track record of nationalizing utilities, railroads, and aerospace companies.

During a visit to the crash site of Ethiopian Airlines Flight ET302 on March 14, 2019 in Ejere, Ethiopia, a mourner lays flowers at the Memorial Arch. The tragic incident claimed the lives of all 157 passengers and crew when the Ethiopian Airlines Boeing 737 Max 8 Flight crashed just six minutes after taking off from Bole Airport.

Jemal Countess/Getty Images

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Boeing already gets around 40% of its revenue from government contracts. The rest comes from plane orders that US officials often promote overseas. According to Stoller, Boeing is like a national champion supported by the state. He believes that thinking of Boeing as a private company is stopping it from being fixed.

Boeing is not facing the financial crisis usually seen before a government takeover, thanks in part to years of government support. Despite this, the idea of nationalization is more of a political curiosity than a realistic possibility.

According to Allon, there are no great short- or mid-term solutions available for Boeing at the moment.

The bigger concern, for him, is what happens when these one-off scary events — door plugs ripping away mid-flight, etc — start becoming more frequent.

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Muntean shows example of bolt that was missing from door plug on Boeing plane

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“This can be really as big as a financial crisis,” considering how many businesses around the world rely on Boeing planes.

He explained that while he doesn't believe all planes will suddenly fall from the sky, if these incidents become more frequent, the risk shifts from being a one-time event to a continuous threat with potentially serious outcomes.

Editor's P/S:

Boeing's reputation has plummeted in recent years due to a series of incidents and quality issues, leading to a loss of trust among regulators, airlines, passengers, and investors. Despite facing challenges like fatal crashes and financial losses, Boeing has avoided legal action or bankruptcy, as it is considered an "untouchable American institution" with minimal regulatory oversight. Its position as a duopoly in the aviation industry makes it immune to market forces and unlikely to be eliminated.

To rebuild trust, experts suggest replacing the company's C-suite executives or even nationalizing Boeing, given its reliance on government contracts and support. However, nationalization remains a political curiosity rather than a realistic possibility. The bigger concern is the potential for frequent scary events to escalate into a continuous threat, posing a significant risk to businesses and the global economy.-suite or even nationalizing Boeing, given its reliance on government contracts and support. However, the feasibility of such solutions remains uncertain, leaving Boeing in a precarious position with no clear path forward.