How Ethiopia Airlines′ Boeing 737 Max crash triggered an aviation crisis | Business| Economy and finance news from a German perspective | DW | 10.03.2020
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How Ethiopia Airlines' Boeing 737 Max crash triggered an aviation crisis

A year ago, the world was shocked when a second state-of-the-art Boeing 737 Max passenger jet crashed. The fallout, for the US planemaker and global aviation as a whole, still continues to be felt, says Andreas Spaeth.

Shortly after an air crash, public interest quickly wanes and the lawyers take over. Not so in the Boeing 737 Max scandal.

Questions about the safety of the latest edition of the world's best-selling jet continue to hit the headlines, and the planemaker still struggles to account for a series of errors that lead to two deadly crashes, in Asia and Africa.

Development of the 737 Max "was marred by technical design failures, lack of transparency and efforts to obfuscate information about the operation of the aircraft." That is the damning assessment of a preliminary report issued by the US House of Representatives' Transport Committee late last week. "Boeing and the FAA gambled with the public's safety," the report states, also blaming the US aviation regulator.

A year ago this week, an Ethiopian Airlines plane went down shortly after takeoff from Addis Ababa Bole International Airport. The crash was the second of the almost brand new 737 Max in five months. In October 2018, a Lion Air jet suffered a similar fate, minutes after leaving Indonesia's capital, Jakarta. A total of 346 people died in both disasters.

Days later, all 387 Boeing 737 Max jets already delivered to airlines were grounded. Production was slowed and then halted altogether in December. Today, more than double that number remain on the ground — a first in aviation history — and the plane's future is more uncertain than ever.

Calhoun the right choice?

Just as the US House report was released, Boeing's new CEO, David Calhoun, granted the New York Times a rare interview, insisting that the magnitude of the problems the firm faced was "more than I imagined it would be." He also hit out at the "weaknesses of our leadership."

Two pictures, one with David Calhun and one with Dennis Muilenberg

David Calhoun (left) took over from his hapless predecessor Dennis Muilenberg in December 2019

The CEO's comments enraged many of Boeing's employees. After all, it was the same executive who earlier declared that his predecessor, Dennis Muilenburg — who was fired late last year — had done "everything right."

Many observers doubt whether Calhoun is the right person to help Boeing reform its corporate culture. After all, they say, he contributed to the current state of affairs as he has sat on Boeing's board since 2009.

Dozens of grounded Boeing 737 Max aircraft are seen parked in an aerial photo at Boeing Field in Seattle, Washington, U.S. July 1, 2019

It was hoped that Boeing's 737 Max fleet could return to the air this summer

Unprecedented turn of events

Boeing, meanwhile, faces massive fines of at least $25 million (€21.9 million) for using uncertified parts in the 737 Max. The penalties are just a fraction of the overall economic losses Boeing will likely incur.

The Wall Street Journal recently reported that authorities are about to impose directives requiring electrical wiring fixes inside all the roughly 800 737 Max jets produced so far, which could trigger further delivery delays. 

The scandal is not only the biggest challenge for the US manufacturer in its more than 100-year history. The debacle has also thrown the system of global aircraft certification into doubt — a system that had been practiced for decades and was perceived as functioning well.

A particularly shocking revelation from the crashes is that the company's safety culture — which had long been admired — had been found wanting. Boeing continued to live off its almost legendary reputation even after profits and shareholder value took precedence. But having delivered record revenues, Boeing is now suffering the biggest losses in its history.

Certification issues

Meanwhile, the US aviation authority, the Federal Aviation Administration (FAA), faces a massive loss of standing for being too closely intertwined with the planemaker.

Watch video 01:53

Boeing's suppliers hit hard by 737 Max freeze

Until now, any safety update issued by the FAA was automatically embraced by other global certification authorities. This might now change after recent criticism by the European Union Aviation Safety Agency (EASA) and Canada's transport secretary.

The airline industry association IATA fears that the new regulatory burden will further lengthen delays to new plane deliveries. A key litmus test will be the certification of Boeing's new long-haul aircraft 777X, which is already a year late. One of the first recipients, Lufthansa, says it doesn't expect delivery before late 2021.

The 737 Max crisis has also had a major impact on the US economy. Treasury Secretary Steve Mnuchin said in January that Boeing's woes could shave about half a percentage point off the country's GDP for 2020, downgrading growth forecasts —  before the coronavirus epidemic took hold — from 3% to just 2.5%.

Boeing admitted earlier this year that it was already facing about $10 billion in costs related to the scandal. Even if the 737 Max returns to the skies by June or July, analysts still think the damage to the planemaker's bottom line will double, and that's before financial settlements to the crash victims' relatives.

Boeing 737 Max assembly line

For every month the 737 Max production lines are idle, another $1 billion in losses is added

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