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Reality Intrudes On Boeing And The FAA

Southwest Airlines Boeing 737 MAX.
photo by Bill Abbott

Boeing and its chief federal regulator continue to engage in magical thinking about the fiasco known as the 737 MAX – and reality continues to intrude.

After months of insisting that its flawed best-seller would be tweaked and flying again by the end of this year, Boeing found itself weighing the cost of a review process that will extend into 2020. The Wall Street Journal reported earlier this week that Boeing planned to either cut back or suspend production of the MAX; after a two-day board meeting, the company announced it would temporarily stop making the MAX altogether in light of the ongoing regulatory review. Boeing has pledged to avoid layoffs, but roughly 12,000 workers will be reassigned in consequence of the production halt.

There is still no date in sight for when regulators might approve the upgrades Boeing is making to the fleet to fix the flawed flight-control system known as MCAS, which led to the crashes in October 2018 and March 2019 that together killed 346 people. Even when American regulators eventually give their blessing, it will not be enough. Foreign aviation authorities no longer trust our safety review process and have promised to make their own assessments before they allow the 737 MAX to fly in their airspace once more. Some regulators, including the European Union Aviation Safety Agency, have said they will also take a more proactive role in evaluating forthcoming jets from Boeing.

A House committee report issued earlier this month demonstrates how right those foreign regulators are to distrust the U.S. process. In November 2018, weeks after the crash of a Lion Air MAX jet in Indonesia killed 189 people, the Federal Aviation Administration concluded in an internal analysis that the jet could be expected to have an accident on average once every two to three years – far more often than is expected or acceptable in a modern commercial airliner. Yet the FAA talked itself (and allowed Boeing to help talk it) into allowing the MAX to continue flying with no more than a cautionary briefing for pilots. A few months later, an Ethiopian Airlines jet screamed full-speed into the ground, taking another 157 lives.

Rep. Peter DeFazio, the Oregon Democrat who chairs the House Transportation Committee, aptly summed it up: “Despite its own calculations, the FAA rolled the dice on the safety of the traveling public and let the 737 MAX continue to fly.”

The FAA (then under Acting Administrator Daniel Elwell) only got around to grounding the MAX after foreign regulators acted and President Trump ordered it. Yet new FAA chief Steve Dickson insisted to DeFazio’s committee that “The system is not broken.” If this is a working system for protecting passengers and crew, what would a broken system look like?

The MAX is no longer a safety threat to people in the air and on the ground, which is progress. Yet the aircraft promises to wreak commercial havoc far into 2020. Domestic and foreign airlines have had to scramble and re-scramble their schedules to accommodate planes they either have and can’t fly, or expected to have but can’t receive. Southwest Airlines, the largest operator of the MAX, is short at least 75 planes between grounded aircraft already in its fleet and unfilled orders it had expected to receive this year. Meanwhile, Boeing has set aside more than $6 billion to compensate its customers, while its own workforce and its suppliers shoulder much of the resulting economic burden. Even the U.S. trade deficit is worse off, as one of the nation’s biggest exporters can’t deliver its best-selling product. Bad as all this is, the long-term reputational damage to Boeing, and to U.S. aviation in general, may prove even worse.

Yet Boeing and its regulators still seem to accept reality only when it forces itself upon them. It’s dispiriting to watch for those of us who closely follow corporate and government policy. At the same time, it is a fascinating public experiment in human psychology and organizational behavior. The scale of the screw-ups was so great, and the consequences so terrible, that even after more than a year the top decision-makers seem unable to appreciate what their organizations have wrought. But those of us who are not caught up in their emotional drama can see this colossal failure and its results for exactly what they are.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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