Question

With the second crash of Boeing 737 – Max leading to more than a hundred people losing lives, Boeing is facing an unprecedented challenge it has never faced before. Several airlines – both foreign and domestic airlines have grounded the 737-Max causing several million-dollar revenues for these airlines. It is likely to cause uncertainty with respect not only to the future sales of the 737 – Max’s, but to the Boeing brand. It’s crisis time indeed for Boeing. What went wrong and why?

Given these circumstances and based on earlier experiences of other firms dealing with crises such as these - give some examples from the literature and the steps taken by these firms to regain market share and more importantly confidence among buyers), discuss some general and specific strategies which Boeing needs to take to restore confidence and not experience market losses. What should be the role of the U.S. government regulatory authorities in addressing this issue? Why this has national security dimensions besides commercial implications? Explain.

Answer 1

Boeing is one of the two biggest companies which dominates the passenger airplane industry as other being Airbus of France.
Airbus 320 series is like to Boeing 737 and they compete with each other in a competitive market. Airbus 320 family has a couple of models but pilots can fly that interchangeably without any further training. The 320 NEO model launch by Airbus further threatened Boeing in that segment in 2010.
Boeing had few options left and it could have sold 737 models in discount while developing new plane which could have competed with 320 NEO. However, it decided to launch a new plane with introducing bigger engines under its wings in the line of 737 and that is 737 Max 8. That completely changed the aerodynamics of the plane. It increased the risk of stalling the plane when the nose of the plane is angled high by the pilot. Boeing introduced Maneuvering Characteristics Augmentation System (MCAS) which is supposed to solve the problem and work automatically. The problem found to be in this system where it was needed to be manually overridden by the pilot but it would reset again and so continuing the cycle. In one of the crash, such a cycle was repeated 21 times before the crash. This was a software problem which Boeing could not detect and could not correct even after the first crash.

Technical glitches or manufacturing problems were not new in the automobile or for that matter aviation industry. However, these problems need to first admitted by the company and corrected as early as possible. There are examples when auto companies had to recall their products in massive numbers because technical glitches resulted in deaths. Even in the aviation industry, Concord had to shut the business after it has gone through manufacturing defects. The companies can arrest the downslide of sentiments by effective communication to the market with commensurate steps to rectify the manufacturing defects which could be in compliance with regulating body or the judicial system.

The regulating body has too much responsibility in this case. It must develop safety standards and testing of such products before it hits the market. However, aviation regulating bodies worldwide lack the resources to address this issue and the US regulating body also on short of gas when it needs to have a check on all these aspects. The Federal Aviation Authority or FAA actually relied on Boeing itself for tests and certification.

Such failures and resulting accidents not only pose commercial doom for the company but it has some serious security implications also. A crash of airplane means loss of lives and it could be fatal if it crashes in the densely populated city like NY. Heads of the state also use these planes and a crash can spell trouble.