Damage to Boeing’s reputation may be irreparable amid lost credibility
Boeing is seeking to regain public trust and re-establish itself as the world’s pre-eminent aircraft manufacturer with the appointment of a new CEO, but correcting the engineering flaws in the 737 Max jet may be the easy part, according to analysts.
To restore credibility, Boeing must be open and direct when dealing with the US Federal Aviation Administration, or FAA, customers, pilots and the public, say the analysts. But a plaintiff’s attorney believes harm to the company’s reputation may be irreparable.
“I’m not sure there is anything the new CEO can do to correct the damage as far as how the victim’s families view Boeing,” said Floyd Wisner, an Illinois lawyer who has negotiated out-of-court settlements for some of the relatives of those killed in the Indonesian crash of a 737 Max in October 2018.
“All trust is lost and there’s a great deal of anger－especially among the families of those killed in the Ethiopian Airlines crash, who rightfully believe Max should have been grounded immediately after the Lion Air crash in Indonesia, ” he said. All 737 Max planes around the world were grounded following the Ethiopian Airlines crash in March 2019, which killed all 157 people aboard.
Analysts have estimated that Boeing will spend at least $20 billion to return the Max to service. Costs include compensation to airlines for lost revenue due to the grounding of the jet, out-of-court settlements with family members of those killed in the crashes as well as the cost of storing new but undelivered aircraft and returning grounded planes to the air.
The New York Times reported that Boeing has developed strategies for airlines to win back public trust and customers, including handing out cards to passengers stating why the plane is safe, having flight attendants or members of the flight crew personally address a customer’s fears, or even rebooking passengers on a non-Max flight.
The crashes of the Lion Air flight in Indonesia and the Ethiopian Airlines flight in Ethiopia, killing a total of 346 passengers and crew, sparked the exodus of Boeing’s top management.
CEO Dennis Muilenburg, 55, was fired on Dec 23. David Calhoun, currently board chairman of Boeing, takes over as CEO on Jan 13.
Muilenburg, an aerospace engineer, assumed the top post in 2015 after being with Boeing for 34 years. CNN reported last week that public filings show he could be entitled to more than $30 million in compensation－$20 millionplus worth of vested stock and a pension package totaling more than $11 million－and potentially a severance payment of about $7 million.
Muilenburg was criticized for making overly optimistic statements about the Max’s return to service and for his tin ear in dealing with criticism from Congress, regulators and family members of the crash victims.
After the second crash, Muilenburg said the Max would return to service by December. But United Airlines recently said it had pulled the jet from its schedule until June 4 after previously expecting flights to resume in March. Southwest and American airlines hope the plane will return to service by spring.
With Muilenburg’s exit, other Boeing executives are also leaving. The company’s top lawyer, Mike Luttig, who advised Muilenburg on strategic and legal matters following the crashes, will retire in early January. Kevin McAllister has been removed as head of Boeing’s commercial airliner division and Anne Toulouse will resign at the end of the year as vice-president for communications.
Calhoun, the new CEO, is former senior managing director and head of private equity at investment firm Blackstone Group and former chairman of Nielsen Holdings, a marketing and media information company. He has served as a member of Boeing’s board of directors since 2009 and, like other directors, approved the initial version of the Max’s flawed anti-stall system. He therefore shares final responsibility for the Max’s design and the company’s response to the crashes.
Calhoun already appears to be setting a different tone with the FAA. Last week, he personally called the regulatory agency and talked privately with officials rather than including other top executives on the call, The Wall Street Journal reported.
The conversation followed Boeing’s release to the FAA of what some see as still more damaging documents about the Max’s development. The content of the documents hasn’t been disclosed, but Boeing has acknowledged they could be damaging.
Earlier this month, Boeing announced a temporary halt in Max production, a move that’s likely to disrupt the supply chain.
“You need redundant systems－double and triple redundancy that would operate and warn the flight crew if anything goes wrong,” said John Cochran, professor emeritus of Aerospace Engineering at Auburn University in Alabama and president of Eaglemark, an aviation consulting firm.
“That’s good engineering. Boeing’s new CEO also will have to be a good public relations man. He must be honest and persuade everyone, including the FAA, that things have changed from top to bottom at Boeing.”