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Businesses that fly or supply components to Boeing aircraft face continued uncertainty as the scandal-shaken company endures its prolonged tailspin. The beleaugured aircraft maker continues to struggle with the negative fallout set off by the loss of one of its 737 Max side panels January 5. Additional malfunctions this week have raised new questions about the solidity of its planes. In response, the company is reportedly moving to improve its production quality by shrinking formerly sacrosanct financial targets -- and expanding safety metrics -- when it determines employee bonuses.
Boeing's bad news this week came from nearly every angle. The most prominent incident occurred at San Francisco International Airport, where one of its jets lost a wheel as it ascended, forcing the Japan-bound flight to make an emergency landing in Los Angeles. The only shred of good news from the incident was that the emergency touchdown was completed safely, and the afflicted aircraft was a 777 model, not a 737 Max, the Boeing model at the center of production safety concerns.
On the downside, the falling wheel scare suggests the 777 model line will now also be scrutinized for potential safety concerns.
Worse still, the dropped tire incident coincided with the National Transportation Safety Board opening an investigation into a little-known February 6 malfunction on a United 737 Max whose tail rudder became stuck after landing at Newark Airport. Though certainly less threatening to stability than had it occurred during flight, the freeze-up of a main navigational component of a passenger-filled plane spurred the NTSB inquiry into the cause of the trouble.
The parade of negative headlines continued Thursday, after United Airlines, a major Boeing customer, made a frustrating announcement of its own.
The airline said it would pause its pilot hiring plans in May and June since the production limits imposed on Boeing meant fewer deliveries of the 737 Max planes it had expected to receive this year. The Federal Aviation Administration capped Boeing's 737 Max production at 2023 levels after one of the craft lost a side panel during the January 5 ascent of an Alaska Airlines flight. Consequently, the manufacturer is now only expected to hand over 56 of the 77 planes United ordered for 2024.
But apart from general sympathizing, why should founders and leaders of smaller companies care about the aviation giant's problems? Because, in addition to many entrepreneurs relying on those planes to travel for business, a huge number of smaller companies are also being rocked by the turbulence at Boeing.
According to Boeing, over 6,000 of its suppliers are small businesses, including 600 veteran- and 850 women-owned companies. Both the FAA's limitation on this year's 737 Max production to 2023 levels and the continued uncertainties produced by each new setback buffeting Boeing have direct, negative consequences on those businesses, which rely on the manufacturer's $34-billion annual parts and assembly spending.
So what signs should those businesses look for to assess whether Boeing will eventually pull out of its tailspin?
For starters, the apparently sincere change of heart the company's management has demonstrated over the past two months. Exhibit A of that is its stated determination to restore safety priorities over decades-long profit and dividend imperatives. The relentless cost-cutting imposed to attain those financial goals has been blamed for the company's degraded quality controls. Those priorities remained intact even after two catastrophic 737 Max crashes in 2018 and 2019 killed 346 people.
Indeed, in responding to repeated criticism from FAA officials since the January 5 scare, Boeing executives have matched their statements of contrition with moves to improve inspection standards. Last month, they created new senior positions to oversee enhanced safety. According to the Wall Street Journal, they're now also making quality control performance the core critereon in calculating employee bonuses -- replacing financial objectives that previously represented 75 percent of those metrics.
Meanwhile, Boeing has said it is negotiating with its fuselage supplier, Spirit AeroSystems, about re-acquiring the former affiliate, which it sold off in 2005 as part of its divestment and profit-boosting activities. A successful acquisition could start to remedy two problems at once.
First, it would put the manufacturing facilities at the source of the January 5 737 Maxfailures back under Boeing's direct production and inspection control. Since such a move would also require a big reinvestment effort, it would be a visible signal of the aircraft maker's determination to restore safety levels no matter the price.
That would give the company's small-business suppliers reasons to take heart, even if the seemingly endless chain of negative developments lengthens further through an already difficult year.
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09.03.2024
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Businesses that fly or supply components to Boeing aircraft face continued uncertainty as the scandal-shaken company endures its prolonged tailspin. The beleaugured aircraft maker continues to struggle with the negative fallout set off by the loss of one of its 737 Max side panels January 5. Additional malfunctions this week have raised new questions about the solidity of its planes. In response, the company is reportedly moving to improve its production quality by shrinking formerly sacrosanct financial targets -- and expanding safety metrics -- when it determines employee bonuses.
Boeing's bad news this week came from nearly every angle. The most prominent incident occurred at San Francisco International Airport, where one of its jets lost a wheel as it ascended, forcing the Japan-bound flight to make an emergency landing in Los Angeles. The........
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