Unresolved crises, like zombies, return with a vengeance
- Patrick Trancu
- Jan 31, 2024
- 8 min read
On March 20, 2019, I wrote an article titled "Crisis management: what can we learn from Boeing’s handling of the B737 Max crisis?", which might be worth re-reading in light of Boeing's latest crisis. At the start of that article, I wrote:
And as we have seen too often, highly visible crises give crisis management and communications consultants a great opportunity to express their views and pass judgement on the actual management of the crisis, often criticizing decisions taken while enjoying the enviable comfort of their seats and benefitting from 48/72 hours hindsight. At times even with little understanding of the industry involved. (...) Personally I have no interest in this kind of exercise (...) I am interested in trying to understand – with the limited information I have – the context that nurtured the crisis management decision making process in Seattle and what, if anything, we can learn from it.
Maintaining this very same philosophy I think it is appropriate to focus once again on what is happening at Boeing to push our crisis management thinking a step further.
Culture seeds crises
In discussing the "defining moment" of the 2018 crisis I wrote:
In crisis management decisions must be constantly taken as scenarios are projected, unfold and need constant re-examination. However, it is one pivotal decision, a single defining moment, in the early stages of the crisis that sets the course. Once that decision is taken, the direction of the crisis is set and the clock cannot be turned back.
At the time the defining moment for Boeing came (and passed) with the Lion Air crash in Jakarta. It is a this time that Boeing should have asked itself the “what if” question. And that question should have been: “What if we have another crash with the same aircraft?”
I ended my article with a simple question. What prevented the company (culture, procedures, personalities, cognitive biases…) from seeing the potential risk ahead?
Books (Flying Blind: The 737 MAX Tragedy and the Fall of Boeing), a documentary (Downfall: The Case Against Boeing), and numerous articles have since linked the two deadly MAX 8 crashes to one fundamental problem at Boeing: culture.
Boeing's culture shift
There is a consensus that Boeing's culture shift from engineering excellence and a safety-first mindset towards a business model heavily emphasizing cost efficiency and rapid production, often at the expense of product quality and safety can be traced back to its late-1990s merger with McDonnell Douglas. In his recently published article Aram Gesar at Airguide.info writes:
The merger between Boeing and McDonnell Douglas in the late 1990s signaled a critical turning point, leading to the gradual erosion of Boeing’s engineering-driven culture. Influenced by McDonnell Douglas’s more commercially oriented and profit-driven approach, this shift precipitated notable changes in Boeing’s priorities and practices, culminating in the 737 Max crisis and a tarnished reputation for a company once synonymous with engineering excellence. (...) the merger introduced a starkly contrasting business philosophy (...) The current challenges Boeing faces trace back to the cultural and philosophical changes post-merger with McDonnell Douglas.
In his opinion piece published by The New York Times, Bill Saporito, an aviation journalist wrote:
We often use the word “iconic” to describe companies such as Xerox, U.S. Steel and General Electric when we really mean “no longer great.” And Boeing no longer is.
Back in the spotlight
The January 5th, 2024, Alaska Airlines mid-air emergency caused by the blowing out of an emergency door panel at 16,000 feet on a Boeing 737 MAX 9 aircraft causing an uncontrolled decompression of the aircraft necessitating an emergency landing in Portland, Oregon has brought Boeing back into the spotlight.
It highlights ongoing safety concerns with the Boeing 737 Max series and the challenges facing Boeing in ensuring the safety and reliability of its aircraft. A comprehensive description of the events is available here.
The incident has caused a reputation crisis for Boeing and the company's chief Dave Calhoun’s leadership is now under scrutiny, writes the FT. The former GE executive is under tremendous pressure from customers, pilots, regulators, and politicians over safety concerns. But in my view, it would be a mistake to simply "frame" it as a "reputation" crisis.
In a fairly extraordinary development for the aviation industry, the incident has led stakeholders to publically vent their frustrations with the plane maker. According to a Jan 24th FT article inspections carried out by airlines revealed quality problems with the aircraft. Ben Menicucci, chief executive of Alaska Airlines stated «his airline had found “some loose bolts on many” Max 9s during inspections of the planes. He told NBC News he had held “very tough, candid conversations” with Boeing’s senior leadership. “I’m angry. I’m angry. I’m more than frustrated and disappointed. I am angry,” he said.
United Airlines had to ground its fleet of 79 Boeing 737 Max 9 aircraft following this incident. The financial impact of these groundings and uncertainties around future Boeing aircraft deliveries has led United to consider reducing its orders and exploring alternatives for its fleet expansion. American Airlines chief executive Robert Isom urged unnamed Boeing people to “get their act together” as he threatened to “hold them accountable”. In a humiliating move, «Ryanair has doubled the number of its engineers overseeing Boeing’s production lines following the manufacturing problems that have plagued the US plane maker», wrote the FT.
Lessors also made their voices heard: Boeing cannot “afford another slip-up” with its 737 Max family of aircraft and must set aside financial targets to focus solely on quality and safety, the head of one of the world’s largest aircraft owners has warned, wrote the FT on January 18th. “Given what has happened with the two fatal crashes and this incident, the financial targets have to take a back seat for Boeing and its supply chain,” said Aengus Kelly, chief executive of the world’s biggest aircraft leasing company AerCap.
The grounding of the Max 9 aircraft has led not only to increased scrutiny of Boeing's production processes and quality control but also to the FAA not allowing Boeing to expand 737 MAX production in the wake of the mid-air emergency on the Alaska Airlines jet.
The bucket stops with Boeing
After initial confusion about who was responsible for the panel's failure, Boeing or its fuselage subcontractor Spirit AeroSystems, The Seattle Times reported that «The fuselage panel that blew off an Alaska Airlines jet earlier this month was removed for repair then reinstalled improperly by Boeing mechanics on the Renton final assembly line, a person familiar with the details of the work told The Seattle Times. If verified by the National Transportation Safety Board investigation, this would leave Boeing primarily at fault for the accident, rather than its supplier Spirit AeroSystems, which originally installed the panel into the 737 MAX 9 fuselage in Wichita, Kansas».
According to The Seattle Times, «an anonymous whistleblower who appears to have access to Boeing’s manufacturing records of the work done assembling the specific Alaska Airlines jet that suffered the blowout — on an aviation website separately provided many additional details about how the door plug came to be removed and then mis-installed».
Leadership under scrutiny
«Apologies by Calhoun and Stan Deal, Boeing’s head of commercial airplanes, appear to have carried weight with some of the company’s constituents,» writes the FT. Although Calhoun has been credited with a great level of "transparency" compared to his predecessor Dennis Muilenburg ousted for his weak response to the 737MAX 8 crises, leadership changes at Boeing are being called for.
Ron Epstein, industry analyst at Bank of America, quoted by the FT said the Max 9 issues would “only put further pressure on Boeing management”. “We would not be surprised to see regulators, investors and customers push for a turnover in the ranks of senior management and the board of directors”.
In their FT article, Sylvia Pfeifer, Philip Georgiadis and Steff Chávez write:
Calhoun has overseen the Max’s return to service after the two crashes, refreshed its top management team and created a board-level aerospace safety committee. And in a timely boost for Boeing, the plane maker last week delivered its first new Max to a Chinese airline since the grounding of the fleet in 2019. Yet problems on the production lines and quality control issues have persisted, exacerbated by labour shortages coming out of the pandemic. The mis-steps are evidence that Calhoun’s promises to strengthen Boeing’s engineering culture and push through fundamental corporate change have so far not delivered, critics said.
Unresolved crises, like zombies, return with a vengeance
At first sight, it may seem that Boeing is facing today a new crisis, a "reputation" one. But this - in my view - is not an accurate assessment.
The reality is that Boeing is facing the consequences of an unresolved crisis - the MAX 8 crisis - and is now facing a creeping crisis in an even more complex environment. It's what I call the "return with a vengeance" setting.
(ChatGPT) «In a business context, a creeping crisis refers to a slowly developing situation that can eventually pose a significant threat to the company's reputation, financial health, or operational stability. Such crises often go unnoticed or are inadequately addressed until they reach a critical stage. Examples include:
1. Technological Obsolescence: A company may fail to keep up with technological advancements, gradually losing its competitive edge. This kind of crisis can creep up as the market evolves and consumer preferences shift.
2. Cultural or Ethical Issues: Problems like toxic workplace culture, unethical practices, or lack of diversity can build up over time, leading to employee dissatisfaction, reputational damage, or legal challenges.
3. Financial Decline: Gradual financial deterioration due to increasing debt, declining sales, or poor management decisions can lead to a financial crisis if not addressed in time.
4. Supply Chain Vulnerabilities: Over-reliance on specific suppliers or regions without adequate risk assessment and mitigation strategies can lead to a crisis if disruptions occur.
5. Regulatory Compliance: Failing to keep up with changing regulations can result in legal troubles and fines, damaging the company’s reputation and financial stability.
6. Customer Satisfaction and Loyalty: Slow erosion of customer satisfaction due to declining product quality, poor customer service, or failure to innovate can lead to a loss of market share.
Recognizing and addressing these creeping crises require proactive monitoring, regular reassessment of internal and external environments, and a willingness to adapt strategies and operations. Companies must have effective risk management processes and a culture that encourages vigilance and responsiveness to gradual changes and emerging threats.»
Boeing's complex creeping crisis
Aircraft manufacturing requires decades of design, planning, and prototyping. The market for aircraft above 100 seats is a duopoly between Boeing and Airbus. Airlines don't have a lot of choice in terms of where they can source aircraft. Still, Boeing is facing an existential threat. As Saporito reminds us in his NYT opinion piece: «Hughes Aircraft, Douglas Aircraft, Northrop, North American, Lockheed» all once American aerospace icons have, for one reason or another, disappeared.
Not only is Boeing challenged by many of the factors previously outlined (almost all of them) but from a commercial standpoint it has a limited range of aircraft on offer to the market and it has lost significant market share to its competitor Airbus in the profitable single-aisle category (Airbus now holds a market share of 62 percent in the narrow-body segment). It has also failed to present a vision for decarbonization and the future of the industry.
