Boeing’s bad week roils an industry

It was a week that began in tragedy with the second fatal crash of Boeing Co.’s 737 Max jet in five months, and it ended with the first of what could be many short-term financial warnings as the aviation industry grapples with only the third fleet-wide grounding by the Federal Aviation Administration (FAA) since the 1970s.
We still don’t know exactly what happened to cause an Ethiopian Airlines flight carrying 157 people to crash shortly after takeoff; the country’s transport minister plans a weekend update. But evidence collected thus far – including a jackscrew retrieved from the wreckage – indicate the plane was pushed into a dive similar to that of a Lion Air jet that crashed in October, killing 189 people.
The screw-like device was reportedly what helped convince the US to abandon an increasingly solitary defense of the Max’s airworthiness. It was a decision that should have been made much earlier, as Ray LaHood – the former US Secretary of Transportation who grounded Boeing’s 787 Dreamliner in 2013 for other safety reasons – told my colleague David Fickling. And when the decision did come, it was too little, too late to save both Boeing and the FAA from significant reputational blowback.
Instead of embracing transparency and accountability from the start, the planemaker and the regulator were made to look like defenders of profits rather than passenger safety as China, not the US, took the lead in grounding the Max.
Perhaps most stunning is Ethiopia’s snub of the US in deciding where to send the black boxes. If there is a political takeaway from this, it’s that the word of the US no longer means what it once did in a presidential administration that has a penchant for bending the truth.
The situation has also cast a harsh pall on the tight-knit relationship between Boeing and the FAA, and the lack of a confirmed leader for the regulatory agency. If in fact both the Lion Air and Ethiopian Airlines crash are linked to the same flight-control safety system, then that raises questions about why the design updates for the Max weren’t tested more rigorously in the first place and why Boeing and the FAA didn’t act with more urgency to fix the problem after the first incident.
Air Canada said it was suspending all 2019 financial guidance given the uncertainty caused by the grounding of the Max, which carries an average of 9,000 to 12,000 customers a day for the airline.
As my colleague Chris Bryant has written, Norwegian Air Shuttle ASA, which has one of the largest Max fleets among European carriers, can ill afford a hit to its finances right now and it’s no wonder the airline expects Boeing to compensate it for what DNB analysts estimate will be a $585,000- to-$1.75 million per-day cost.
The rejiggering of airline fleets could generate maintenance and repair work for Boeing suppliers in the short term. But as with the airlines and Boeing itself, the longer this grounding drags on, the more acute the financial pain, particularly if there’s any hit to production targets or significant order cancellations.

—Bloomberg

Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America