Boeing balances safety and profits amid 737 Max crisis

Boeing balances safety and profits amid 737 Max crisis

Less than four weeks after a Boeing 737 Max 9 jet holed up during a flight, company executives faced a thorny question: Should they emphasize safety or financial performance?

The issue is emerging as Boeing prepares to report its fourth-quarter earnings on Wednesday amid its most significant safety crisis in years. The Jan. 5 incident aboard a Max 9 flight is still under investigation, according to two people with knowledge of the matter, with executives grappling with how much to discuss quality control while also reassuring shareholders. That the company is protecting their investment.

The National Transportation Safety Board is expected to release a preliminary report in the coming days on the incident, which occurred aboard an Alaska Airlines flight. The report could shed more light on how a panel caused the Max 9 to blow up and will certainly increase scrutiny of Boeing by lawmakers, airlines and safety groups.

Boeing Chief Executive Dave Calhoun is expected to talk about safety during the company’s call with investors after the release of its earnings report Wednesday morning, one of the people said. But it is unclear what balance he and other officials will strike in their comments while trying to contain the fallout from the Max 9 incident.

The topic has taken on new importance after news accounts, including a report by The New York Times, said that Boeing workers opened and reinstalled a panel known as the door plug. Alaska plane explodes shortly after takeoff from Portland, Oregon. The revelation suggests that the incident — which terrified passengers and forced pilots to make an emergency landing — may have been caused by a lapse at the Boeing factory in Renton, Wash. ,

Some aviation experts and officials have long said that Boeing’s safety problems and its financial performance are linked. These people say that the company has for years placed too much emphasis on increasing profits and enriching shareholders with dividends and share buybacks, and not enough on investing in engineering and safety.

Boeing’s emphasis on rewarding investors has led to quality and safety problems, its critics say, including two 737 Max 8 plane crashes that killed nearly 350 people in 2018 and 2019. Those crashes and the effects of the coronavirus pandemic, in turn, have hurt Boeing financially and allowed its main rival, Airbus, to overtake it in sales.

Dennis Tajer, a captain at American Airlines and spokesman for the union that represents the airline’s pilots, said, “Lately, Boeing appoints CEOs who are more focused on stock price and dividends than on flight safety and production quality. Are.”

Boeing declined to comment.

How Boeing deals with its latest crisis in the coming weeks and months could have a wide-ranging impact on its credibility among regulators, airlines and passengers, as well as its long-term financial performance.

Investors are worried that this latest crisis could deal a blow to Mr. Calhoun’s plans to put Boeing on more solid financial footing. The company’s share price has fallen nearly 19 percent since January 5.

Airline officials, federal regulators and safety groups have expressed growing frustration with Boeing and its repeated safety problems.

Mr. Calhoun, who took over as chief executive In January 2020, after serving on the company’s board for years, he vowed that the company would “get better” and “hold itself accountable to the highest standards of safety and quality.”

Robert Isom, chief executive of American Airlines told Wall Street analysts last week That “Boeing needs to get its act together.” He added, “The issues they are dealing with not only in recent times, but also going back several years now, are unacceptable.”

Adding to the sense of urgency for Boeing, the Federal Aviation Administration said last week it was limiting Boeing’s ability to ramp up production of all 737 MAX planes, including approving any additional assembly lines, until The company does not prove that it has resolved its quality control issues. ,

The agency has allowed Max 9 planes, which were grounded after the Alaska incident, to resume flying after inspections. United Airlines and Alaska, the only two US airlines that fly the Max 9, have begun using the planes again in recent days.

Federal investigators are focusing partly on whether the two pairs of bolts holding the door plugs to the plane’s body were loose. were established, No bolt has been recovered.

The circumstances of the Alaska Airlines incident differ from those of the Max 8 accidents: no serious injuries were reported, and the issue appears to be related to manufacturing rather than design. But Boeing’s outlook for its quarterly earnings report in April 2019, just weeks after the second Max crash, could serve as a template for Boeing executives on Wednesday.

During that earnings call, the company’s then-Chief Executive Dennis Muilenburg spent several minutes speaking about safety and quality rather than Boeing’s financial performance.

“Recent events are a deep reminder of the importance of our enduring values ​​at Boeing: safety, quality and integrity, even more so in the difficult times we face,” Mr. Muilenburg said at the beginning of the call. “Our work demands the utmost excellence.”

Analysts expect Boeing to try to reassure stakeholders about its commitment to safety.

“In our view, investors are the secondary audience for Wednesday’s call, as regulators, members of Congress and their staff, and the press and the public are all key constituencies for Boeing to address, including on procedures to ensure safety. The focus is likely to be on quality,” JPMorgan analysts wrote in a note on Monday.

Mr. Calhoun suggested he was not focused on Boeing’s financial performance at this time.

“This is not the time to talk about what I can and cannot do in terms of delivery,” he said. Interview on CNBC on January 10, in response to a question about increasing production of Max planes. “Right now my work is completely focused on, let’s understand and fix the security issue.”

peter avis Contributed to the reporting.

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