Boeing Halts 737 Max Production to Reduce Cash Burn; Suppliers Hit; Measurable Ding to GDP Expected

The lead story tonight at the Wall Street Journal, Bloomberg, and the Financial Times is that Boeing has hit the pause button on manufacturing 737 Max planes, with its “infamous self-hijacking software MCAS,” in the words of Moe Tkacik.

Recall that Boeing had been cheerily promising that the 737 Max would be approved to fly again as of various ever-retreating dates, with the latest being a public comment in November that it expected to deliver planes again potentially in December. Major buyers American Airlines and Southwest had signaled some skeptism by not scheduling a resumption of 737 Max service until March; American had just pushed that back to April.

The FAA swiftly countered Boeing’s happy talk in November. We described at length why there was good reason to take new FAA Director Steven Dickson at his word, telling his troops in a medium guaranteed to get to the press that they should “take whatever time is needed” to assess the plane.

Apparently Boeing has been trying to strong-arm the FAA by other channels. The agency gave a more direct smack-down last week. The latest version, which came in a letter from the FAA to Congressional investigators last week, was pointed:

The administrator is concerned that Boeing continues to pursue a return-to-service schedule that is not realistic due to delays that have accumulated for a variety of reasons.

More concerning, the administrator wants to directly address the perception that some of Boeing’s public statements have been designed to force FAA into taking quicker action.

A Congressional hearing last week also exposed that the Boeing and the FAA both knew that the 737 Max was more crash-prone than typical jets, yet they didn’t consider grounding them until the second fatal MCAS-induced nose dive.

Boeing now has more 737 Max aircraft in its inventory that it sold before the troubled jet was grounded worldwide. The Seattle Times points out that many of Boeing’s 400 mothballed planes will need “extensive maintenance” to be able to fly. The Wall Street Journal cited analyst estimates that the freeze would cut Boeing’s $4.4 billion a quarter 737 Max cash burn by about 50%. As Bloomberg points out:

The factory pause heightens the risk that financial damage will linger for years after regulators clear Boeing’s best-selling plane to resume commercial flight. The cash pressure is rising as almost 400 new aircraft languish in storage due to a global flying ban imposed nine months ago. The timing of regulatory approval for the Max’s return has slipped repeatedly and remains uncertain with Boeing’s relationship with the Federal Aviation Administration in tatters.

And the cost of storing planes isn’t the only source of damage. Later in the same story:

But the company still faces eye-watering costs to compensate airlines for lost flying that will only grow with the disruption to production. Customer concessions could double to $11 billion from the previously announced $5.6 billion, [Jefferies analyst Sheila] Kahyaoglu said.

One bit of good news is at least for now, the 737 Max workforce has been spared; they are being shifted to other planes. But as we’ll discuss, employees at major parts-makers for the 737 Max may not be so fortunate.

On the one hand, I have to confess to schadenfreude in seeing Boeing suffering the consequences of its reckless, self-serving behavior and its success in capturing the FAA. It was disturbing, even with no stake what happened to the 737 Max, to see CEO Dennis Muilenburg’s scapegoating of pilots, misrepresentations about Boeing’s awareness of problems with the plane, and repeatedly unrealistic timetables about when the 737 Max would be greenlighted to fly again.

Boeing also seemed to be remarkably obtuse about the significance of the damage it had done to the FAA and how having the US regulator discredited was not in its commercial interest. Even while it is in the doghouse, Boeing has repeatedly tried to pressure the FAA by presenting timetables when it expected the agency to grant its blessing. It isn’t merely that the FAA has found new problems with the plane as it has looked harder, such as physical difficulties in operating the manual trim wheel, leading to delays in the certification process. It is also that the agency has twice found it necessary to slap down Boeing’s ham-handed efforts to muscle the FAA by disputing Boeing’s assertions.

But even so, seeing Boeing suffer more, and more tangible damage from the 737 Max fiasco hasn’t yet dislodged Muilenburg, who is in his own way, as arrogant and tone deaf as departed Wells Fargo CEO John Stumpf. Some try to defend Muilenburg by arguing that the 737 Max project was well along before he became CEO. That does not cut it. He made no discernible effort to alter its risky course. He’s done a terrible job of crisis management and now of the relationship with the FAA. Yet the Boeing board seems so convinced of the company’s too big to fail status that it’s unwilling to engage in the overdue ritual defenestration.

The knock-on impact of the production freeze will be significant. From the Journal:

“It would be hard to have any other single company stop the production of a single product and have it hit the economy as hard as this would,” said Luke Tilley, chief economist at investment-management firm Wilmington Trust. He estimated that stopping MAX production for one quarter would shave 0.3 of a percentage point from quarterly annualized GDP growth.

Boeing’s suppliers will take a blow,. With the propensity of major firms to concentrate production among fewer suppliers (to gain more pricing leverage, natch), the damage to some could be large. And they also be less likely to shield their workers even in the near term. From Bloomberg:

The 400,000 parts that go into each Max arrive in a tightly choreographed sequence timed, in some cases, down to the hour.

“If it shuts production down, it risks losing employees and having greater difficulty ramping back up in the future; and the same goes for the supply base,” Cai von Rumohr, an analyst with Cowen, said in a note to clients before Boeing’s announcement.

The pace of work will be determined supplier by supplier, rather than halted across the board, said the Boeing official, who asked not to be named because discussions are confidential. The company doesn’t want to lose capacity at casting and forging companies that struggled with delays last year.

The Journal provided examples:

GE has said it expects the grounding to drain as much as $1.4 billion from its cash flow this year as its factories produce fewer engines for the aircraft and can’t get paid for them in full.

Many suppliers had said they favored Boeing maintaining some production, citing the risk of losing workers in a tight labor market during a halt. They said furloughing staff and stopping machinery would be harder than lowering production, and that restarting assembly lines would be costly.

The spectacle of company of Boeing’s heft floundering is focusing some minds. The normally reflexively-big-company-backing Wall Street Journal readership has a lot of new-found religion. The first comment below got a remarkable 32 likes:

Justin Hayworth

Boeing is a classic tale of why reasonable regulations help the market. Cutting every last corner, taking over the regulatory process to further cut costs, and ultimately loosening safety standards all helped Boeing’s short-term shareholder value.

But the loosened regulations allowed two crashes. Apart from the tragic loss of life, it is having ripple effects across the economy. And following proper protocols would have avoided this whole mess. In the end, the myopic shareholders lose too.

Bob Sanderson

We are witnessing the slow motion crash of a hollowed out version of the great Boeing.

And the continued delays and bad press are not soothing passenger nerves either:

It doesn’t look like Boeing’s pain, and that of customers and suppliers, will end any time soon. Too bad there isn’t a prediction market on when the plane is likely to fly again. It would be instructive to see how it would price dates beyond 2020.

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  1. kimyo

    Boeing also seemed to be remarkably obtuse about the significance of the damage it had done to the FAA and how having the US regulator discredited…

    the damage goes way beyond the faa, i find that people around me are now much more likely to accept that maybe the fda is equally fine with a few thousand dead patients here and there / the nrc with an additional thousand cancer cases every now and then / the ntsb doesn’t seem to mind teslas on auto pilot killing people / epa thinks glyphosate in baby food and breast milk is actually good for the developing infant.

    recall christie todd whitman assuring us a few days after 9/11 that ‘the air is safe to breathe’? these agencies have lost our trust for a reason. the possibility that they might regain it is exceedingly slim.

    1. inode_buddha

      Strongly agreed. Additionally, I think it is important to to remind people of both how and why things are like this, and who is responsible.

      (The revolving door between regulators and private sector, aided and abetted by the legislature) For these people it’s all about the Benjamins, and little else enters their minds, I am sure.

    2. John Baker

      Amen kimyo!! The Boeing situation is one symptom of many. Maybe it will be big enough and hit enough wallets to get some attention but the problem is systemic and pervasive.

    3. skk

      to that list of discredited organisation I’ll add UL ( Underwriter Laboratories ) and NIST ( National Institute for Science and Technology for their discreditable role in 9/11 investigations.
      Those institutions meant something once. Seeing the logo on products, like that of Snell for motorbike helmets, was reassuring and comforting and familiar. And not because of marketing like NIke’s swoosh.

    4. Ignacio

      Yep. The EFSA and Roundup? The EFSA has recently recommended the prohibition of certain insecticides starting in 2020 (chlorpyrifos and methyl derivative) and yet the industry lobbies pressure to avoid this. We will see.

    5. XXYY

      One of the things we have learned over and over again in this new century is that trust takes years or decades to gain but can be lost in a moment. The effect seems to be amplified under a new internet based information system where big news outlets can no longer spin bad news or keep it under wraps.

      The FAA is a good example of this, but perhaps the US as a whole is another. Invasions, bombing, torture, abrogation of treaties solemnly entered, disingenuous treaties and trade wars, and clownish chief executives focused on golf and Twitter have all rendered a once respected country into something else.

    6. rd

      Cancer and airplane dynamics are two completely different challenges.

      Airplanes follow basic laws of physics and chemistry and the issues have been pretty well understood for a long time. They can be designed for and then thoroughly tested in computers, labs, and test flights in a pretty short time frame. The problem with the 737 MAX is that it had become a Rube Goldberg machine in lieu of designing and certifying a new airplane. Then everybody fell down on the testing front.

      Drugs that may cause cancer is a very different problem as the cancer causes are poorly known and the cancers often don’t show up for decades. By the time the data is in from trials looking to see if something causes cancer, it could be 30-40 years later. Penicillin would only have come to market in the ’60s or ’70s. We would only now be getting statins commonly prescribed.

      1. pat b

        the problem with the 737Max was it needed a new type certificate.
        That meant the pilots needed to spend 6 weeks in school and that’s what the
        airlines wanted to avoid.

        So they papered over the critical challenges and made an airplane that a test pilot could fly
        but had really tough handling qualities

    7. drumlin woodchuckles

      Personnel is policy. Personnel is enforcement . . . or enforcement-prevention, depending.

      The Republicans put moles, trolls and termites into these agencies to corrupt their performance, reverse their actual mission, and destroy trust in them by making them untrustworthy. So now people don’t trust them.

      A New Deal Restorationist Administration, with a New Deal Restorationist Congress supporting it, could begin decontaminating the Republican picks and hires from out of the agencies and departments. And also any Clintobamazoid equivalents also hiding there-in. And then re-staff them with pro-stated-mission personnel.

      Make them trustworthy again, and keep them trustworthy for long enough, and they will be provisionally trusted-but-verified again. That would require a New Deal Revivalist reconquest of government to achieve.

  2. PlutoniumKun

    I once worked in an engineering company that had an enforced 6 month break due to a financial crunch affecting a major funder. The company had built up a team of around 200 specialist engineers and had the choice of making them redundant or keep paying them to ensure they could restart the project quickly. Despite protestations from mid level managers, the instructions ‘from above’ was to make everyone with less than 10 years employment, and all on short term contracts redundant. 6 months later the money flowed again and nearly every one of those engineers had to be rehired, this time as consultants at multiples of the hourly rate they’d been earning before. Nobody dared calculate how much this cost in the long run (as it would make the top people responsible for the decision look bad). My guess is that if and when Boeing ramp up production again they’ll find that the costs of everything (technical staff, components, etc) will be much higher.

    The other side of this is the customers. Outside of the US, the ‘bellwether’ must be Ryanair, the biggest single customer for 737’s. They’ve doubled down on their decision, they seem to have tied themselves firmly to Boeing, and surprisingly for them, they don’t seem to be trying to extract better terms. They are already cutting back on routes and no doubt their competitors will be trying to take advantage. It may be that they’ve found nobody else can take up the slack, or they have extracted better terms behind the scenes. Whichever way you look at it, if the MAX doesn’t fly in 2020, its more than Boeing will be in trouble.

    1. Ignacio

      And the ‘doubling down’ goes down in the food chain to airport hubs and tourism investments. Your comment prompted me to do a search and I learned that Ryanair has a base in Girona (Catalonia) where 75% of fligths are Ryanair and heavily seasonal (88% of fligths in summer). The regional government (Generalitat) is very much worried and I have learned they subsidized airlines with about 3,5 million € per year (basically for Ryanair) and that Ryanair asked for increased subsidies after the 737Max debacle. This was later denied suggesting some bad feeling on these subsidies. Now, a desperate Generalitat is asking the authorities to reduce airport tariffs in Girona which sounds as a recipe for more indirect subsidies to the company in the form of increasing airport expenses.

      As an aside, this uncovers the real compromise that some institutions have with climate action and how they subsidise consumption of fossil fuels.

    2. Fazal Majid

      Norwegian is another airline that may well go bust because it uses the 737 Max for most of its short-haul intra-european routes. Pity, as they are a decent option for transatlantic flights now that Virgin Atlantic has been taken over by Delta, with the predictable ensuing service-level nosedive.

    3. fajensen

      My random guess would be that Ryanair’s planes are financed by Boeing on quite favourable terms already. Thus they do not have the choice to abandon the 737 MAX even if they wanted. I think they could go bust.

      1. PlutoniumKun

        I wonder if this is the case with the aircraft leasing industry as well. Ryanair has their origin as a leasing company (the owner, Tony Ryan, simply decided to try directly running some surplus aircraft as a side business), so there may well be financial interrelationships there that could become apparent if Boeing runs into deep trouble.

      2. Harrold

        I believe Ryanair’s planes are financed by the US tax payers via the Export–Import Bank of the United States.

    4. drumlin woodchuckles

      One wonders if the “remnants of Seattle” could stage an internal counter-offensive, expel and exterminate every single one of the McConnell-Douglas personnel and their proteges from Boeing, close and exterminate the South Carolina facilities, close and exterminate the Chicago Headquarters and restore a smaller leaner meaner headquarters in Seattle . . . . and in that way save a non-contaminated stub of Boeing to regrow from if possible.

  3. Ignacio

    This is unfolding in the worst way for Boeing. With worse news after bad news, and for too long, the company takes a hit in confidence that will be difficult, costly and lengthy to restore. First step should be the defenestration of all the top management and the recognition of all the failures commited with a credible promise this will never happen again. Still waiting for this.

    1. notabanker

      Moral hazard is real. The only defenestration we have seen is of the citizenry and consumers. TARP set the stage, and it’s been a long, steady unwinding of anything resembling ethics in the West. Anyone heard from the Sacklers lately?

    2. tegnost

      combine this story with Umair Haque in class warfare and the ACA troubles, put it in a pressure cooker and voila! Black Swan Stew…

    3. drumlin woodchuckles

      Everyone from McConnell-Douglas should be fired, down to any McConDoug janitors who may have infested the previously pure Seattle enterprise. Every single person at every level hired after the headquarters was moved to Chicago should be fired. Every single facility built after the merger and the headquarters move to Chicago should be closed.

      No other way to remove the malignant metastatic McConnell-Douglanoma cells from Seattle-Boeing’s internal organs and blood stream.

      Is there enough chemotherapy in the whole world to de-cancerise Seattle-Boeing?

  4. PlutoniumKun

    On the subject of regulation, I’ve often found it curious at how hostile businesspeople are to regulation even when they clearly and unambiguously benefit from it. In a past working life I was in a small consultancy advising mid to large sized waste and quarry operators in the south of England. At the time – in the late 1990’s, there was a huge concentration in the industry driven by much stricter regulations. What this had done was driven out the smaller operators and ‘cowboys’ in favour of larger companies with the knowhow and resources to comply with stricter environmental controls.

    The smarter operators understood this full well and knew they could profit from cleaning up their act, but it continuously surprised me how often we got endless complaints about ‘stupid regulations driving up costs’, even from the beneficiaries. On more than one occasion I heard businesspeople express bemusement over how some of their colleagues/competitors didn’t seem to understand how much it was to their benefit that the regulations were strict and broadly applied.

    1. The Historian

      Ditto for the nuclear industry and radioactive materials industries. I used to have to listen to complaints all the time about those useless regulations, when it was those regulations that kept them in business. It is like their business people just couldn’t figure out that another TMI would have put an end to their industry in the US. And what is odder is that many of those same people use INPO, a self regulating authority created by nuclear plant operators, that has regulations for its members that are in many ways, stricter than what the US Government imposes on them.

      1. Colonel Smithers

        Thank you, both. Ditto for financial services. The rules, especially from 2009 onwards, act as barriers to entry and enshrine too big to fail, thus allowing the destruction, looting etc. to continue.

        1. rd

          The Financial Crisis is classic regulatory capture with tails I win and heads you lose. They reaped the benefits of a decade of deregulation and then when the house of cards was collapsing got governments and central banks to bail them out, and became so important they couldn’t even be investigated and prosecuted for fraud.

      2. inode_buddha

        Ditto, thank you both. Same in agriculture, where big operators and real estate developers have basically killed the small family farms. Much in the same way that Walmart and Amazon are killing the mom-n-pop stores of my youth. I had long ago concluded that big business was just as evil as big government, and for the same reasons.

        1. Colonel Smithers

          Thank you.

          It’s the same on this side of the Atlantic and further afield.

          If one reads the FT’s week-end edition, there are often adverts for big farms on sale in eastern and central Europe with the added attraction of EU farm subsidies. It’s made clear that these farms are for investment portfolios.

        2. Ignacio

          Farmers must organize themselves as a group to survive and not depend on the commercial channels that squeeze them. Netherland farmers are a good example to follow I believe.

          1. Eclair

            In the US, the National Grange of the Order of the Patrons of Husbandry, founded in 1867, was an organization of farming families (a woman (!) even headed the Fredonia, NY Grange) that promoted political and economic causes for farmers, as well as providing social bonding through pot luck suppers and dances. They formed to counter the big railway corporations setting high prices for transport of grains, provided benefits programs for their members, and promoted rural free mail delivery by the US Postal Service. They were so successful that, like labor unions, they disappeared, leaving behind Grange Halls all over the US.

            My husband’s family, Swedish and Alsatian immigrants who farmed in western New York and north western Pennsylvania, were active members of their local granges. His cousins, a few of whom still farm in the area, are not organized, relying on their (mostly) Republican representatives to take care of their interests. That’s going well.

      3. pat b

        Fukushima was the one that put paid to any nuclear revival.

        To save a few tens of millions, GE and TEPCO sited Fukushima close to the water rather then 10 Meters higher. That saved on pump sizes and energy consumption to get cooling water.

        25 years later, it crippled 4 reactors and caused 3 meltdowns/critical failures.

        To save $80 Million, they blew up a 100 billion in orders later.

    2. inode_buddha

      In a past life I had regular personal interaction with the C-level executives at large privately-held corporations
      (North American).

      My impression is that they don’t mind regulation so much as the hate “being told what to do.” The thinking is that it’s their business, their money and therefore they should make the rules.

      It also grates on them if it costs anything. Any sort of cost is hated, even taxes. Whatever benefit they may derive simply doesn’t enter the picture.

      I think its a question of boundaries in the psychological sense — they need to be told what is theirs and what isn’t. For example, they own the chemical plant, but they do not own the lungs of all the employees.

      1. The Historian

        Very astute comments!
        I think you’ve nailed it and I particularly like your last paragraph.

      2. rd

        Regulation keeps out new competition as it is an initial cost and procedural hurdle.

        If they can capture the regulator, then they can keep out their competitors while managing the costs. Its when the regulator actually tries to do its job, that regulation becomes bad for business.

          1. inode_buddha

            Remarkable when they don’t seem to grasp that it is applied to all, equally. The word “equally” is anathema to most C-level executives that I have known, however. They interpret “equally” as “I lose because I am the same as everyone else”

  5. Steve H.

    So regulatory capture crashed on the rocks of global demand.

    It takes will to work against inequality. TBTF is failing.

    Any chance of reverting the airframes to 737 without MAX & selling at discount?

    1. Math is Your Friend

      “Any chance of reverting the airframes to 737 without MAX & selling at discount”

      Given the current obsession (for practical reasons) with fuel efficiency, I doubt it.

      Remember that the motivation for ‘MAX’ was to accommodate more efficient engines without a major redesign, or admitting to the degree of change.

    1. The Historian

      It is incredibly rare to find any administrator at any government agency that will fight not only the corporate bureaucracy, but his own politicians too – and there is no doubt that he is being leaned on heavily by politicians. I wonder how long Steven Dickson will last in that job as FAA Director. Probably not as long as Muilenburg will last as CEO. I’m sure the deep dive into Dickson’s life is going on as we speak.

      1. J7915

        Where is the secretary of DOT? I think this is too a hot a potato, particularly for the spouse of Moscow Mitch.

        Will a .3% drop in gdp trigger a random tweet storm?

  6. .Tom

    The MAX will still be the worlds first unstable airliner no matter what fixes are made to the sensor and control systems. So what should happen next? Wait for regulators to decide if Boeing’s fixes to MCAS are acceptable?

    1. tegnost

      That’s the problem with lost trust, you can’t get away with what you were used to getting away with. It’s not like the ACA where the industry can force you to comply. No one can be forced onto a 737NFW. There has to be a statistical probability, even if it’s a small probability, that the NFW (otherwise known as the 737MAX) is the Corvair of our modern age, I’m not going to get on one.

    2. Carolinian

      Please stick to the facts. It was the MCAS that was unstable, not the plane. And MCAS was not necessary for the plane to fly and the Canadians even threatened to ban the plane unless Boeing simply removed the thing.

      MCAS was included for bureaucratic and marketing reasons and was badly designed and therefore blew up in their faces.

      The Boeing situation is a management disaster and those people died because of Boeing’s bad management and if Boeing itself dies it will be for the same reason. By not being more open about their mistakes the company has aggravated suspicions and rumors while turning out a product that depends on public trust to be accepted. So even if fears of the Max are exaggerated the management should have understood what is at stake and acted accordingly. They must be following the well known Wall Street adage: “I’ll be gone, you’ll be gone.”

      1. .Tom

        The following is a R. John Hansman’s (MIT aeronautics professor) statement to Forbes.

        As I understand it, at high angles of attack the Nacelles — which are the tube shaped structures around the fans — create aerodynamic lift. Because the engines are further forward, the lift tends to push the nose up — causing the angle of attack to increase further. This reinforces itself and results in a pitch-up tendency which if not corrected can result in a stall. This is called an unstable or divergent condition. It should be noted that many high performance aircraft have this tendency but it is not acceptable in transport category aircraft where there is a requirement that the aircraft is stable and returns to a steady condition if no forces are applied to the controls.

        My recollection was that Yves in the past accepted as factual that 737MAX has an aerodynamic instability novel in passenger transport aircraft and has argued with dissenters on this. So I don’t think that I fail to stick to facts accepted at NC.

        1. Carolinian

          Please note that the Max had been flying around for a year before the accidents and that the MCAS only kicks in when the angle of attack sensor reaches a near stall reading. The MCAS is not on all the time while the plane is flying around and in fact can’t kick in at all until the flaps are raised after takeoff. The plane is perfectly capable of flying with no MCAS at all which is what I said and what the Canadians said. There was an incident where a plane out of Phoenix had the problem and the pilots simply turned the thing off and continued on their way.

          The Max does have different handling characteristics than the previous version and the Seattle Times at first suggested that the system was included to make the plane fly like the previous versions but it then turned out that only applied to certain emergency procedures involving high speed turns (think I have that right).

          Because Boeing won’t talk everything we know about the plane has come from newspaper reports so I would not consider those definitive. What is known is that the system was badly designed and nobody is disputing that. However this has now ballooned into a demand that the plane never fly again based on press reports. Nevertheless this is management’s fault as well. They should have come clean from the beginning and given their attitude there may very well be other things wrong with the plane we don’t know about.

          All I’m saying is stick to the facts and the facts we know with certainty are very limited (which applies to my above argument as well which is based on newspaper reports).

          1. .Tom

            Much of the costs of cleaning up the MAX mess will be passed on to the public one way or another so I think public discussion of my question, what should happen to the plane? is valid. The questions about the aerodynamics of the plane are out there, won’t go away, seem to be important, and, I contend, need to be discussed. Perhaps the right thing to do would be to abandon this version of 737 and start work on a new plane, or partner with Airbus for this part of the market, or fix the MCAS (appears to be the only option considered in the media for now) … Idk. I’m not the expert but I think it’s legit for the public to ask the questions. I don’t trust Boeing to do the right thing. I don’t think sticking only to discussion of verified facts will make Boeing more forthcoming.

            1. Carolinian

              I’m not defending Boeing which has lots of other problems that can be pegged to their bad management. The 787 took forever to finally take to the air and has production problems as has been reported here.

              But surely the thrust of today’s post is the follow on consequences of simply declaring the Max a dead duck without a full accounting of whether that is indeed justified..

      2. expr

        The aircraft without MCAS was potentially unstable. Because the engines were mounted far forward, the center of area was ahead of the center of gravity. When the plane was in a nose up (high angle of attack) position the force of air on the bottom of the plane would tend to force it more nose up, possibly too quickly for the
        pilots to compensate. MCAS was intended to remedy this by detecting high angle of attack and setting trim for the horizontal stabilizer to compensate for the force from the air stream. They just did a very poor job of it.

        1. Carolinian

          The MCAS cannot be activated while the flaps are down and the plane is taking off at maximum thrust. That much is a “fact.” Therefore, logically speaking, it’s not about controlling the handling of the plane when it would be most likely to show a nose up tendency–when at maximum power.

          However the initial Seattle Times report gave the impression that what you say is true and made people think that the design of the airplane as a whole is fatally flawed. Their later reporting walked this back with a more nuanced version of how the MCAS came to be. When Boeing finally did step up to defend themselves they said they didn’t think MCAS was a big deal because it was supposed to never activate during normal flight.

          1. J7915

            In abnormal flight the airplane will go nose down quickly.
            They should have figured out that in abnormal flight situations maybe a flap position over ride would have been an appropiate option.
            The new engine can cause excessive nose up and stall, leave out of LGA, fast climb, and turn because noise issues, helicopter, other fixed wing aircraft, flock of geese, gets in the flight path.
            What is the procedure?
            Flaps down a notch,
            Pull up,
            Cut power,
            Cut trim power,?
            All these actions have been mentioned, as well as lots of flying hrs, not just a Cessna 150 into a 50 mph headwind in OK, with varied airplanes and lots of acrobatic and take offs and landings.
            Pros and cons to all, but first you have to know the MCAS is there, how it works, and how to get your trim control back, the little trim wheel will not necessarily be over rideable.

          2. Carey

            Here’s what you got right:
            “The MCAS cannot be activated while the flaps are down”
            That’s all.

            The rest is gibberish and bafflegab, intentionally or not.

          3. drumlin woodchuckles

            Doesn’t the plane have to climb before it reaches “normal flight” altitude to engage in “normal flight”? And if the new placement of the new engines destabilized the plane for climbing in order to get to “normal flight”, isn’t that a built-in instability problem?

            I am just a layman, so all I can do is wonder. But somehow the blizzard of excuses and handwaves-away for Boeing’s re-positioning of way-bigger engines way further forward from under the wing seems like so much technological hasbara for Boeing to me.

      3. Carey

        >It was the MCAS that was unstable, not the plane. And MCAS was not necessary for the plane to fly and the Canadians even threatened to ban the plane unless Boeing simply removed the thing.
        MCAS was included for bureaucratic and marketing reasons and was badly designed and therefore blew up in their faces.

        This is all false. Keep doubling down, though..

        1. Carolinian

          Actually it’s all true but it’s easy to say otherwise and then strike a pose and say nothing. Make an argument or don’t waste my time.

          1. Carey

            Your claim: “It was MCAS that was unstable, not the plane..”

            The reason MCAS was implemented was because in some high Angle-of-Attack situations, primarily because of the larger engines and thus
            larger nacelles, mounted further forward and higher (a ground-clearance
            kludge), the *control feel* would be counterintuitive: specifically, the control stick back pressure would lessen in these situations, rather than
            increase. The last thing a pilot wants in a rarely-explored part of the flight envelope is for the plane to act “unnaturally”; so the FAA and
            other regulators require that aircraft do not do so. That’s why MCAS
            was implemented, not for “bureaucratic and marketing reasons”.
            MCAs is a software kludge / solution to an aerodynamic problem;
            that can work, but it’d need to be exceedingly well designed; and
            Boeing’s bizarre, inexplicable decision to rely on one AoA sensor
            is not that.

            As for “the Canadians” saying that MCAS can be dropped: no.
            One Canadian Senior Engineer by the name of Jim Marko has
            stated in an email that MCAS is an über-kludge, which is creating
            more problems than it solves; and he’s right, but the aerodynamic
            issues mentioned above still need resolution; ideally, this should
            be an aerodynamic fix, not a kludge-on-kludge software one.
            Without either a better (?) MCAS or aerodynamic fixes to the pitch-up
            problem, the 737 MAX cannot meet FAA (and likely other regulators’)
            safety requirements.

            The 737 first flew in 1967; was hot-rodded as the 737NG in (IIRC) 1997; and Boeing tried again with the MAX in 2013, despite its
            competitor’s basic airframe (A320) being twenty years newer..

    3. timbers

      I have read Russia is having a turkey of a plane problem, too, that might make the 737 look awesome…but haven’t boned up on the details…not that it’s getting much attention to bone up on.

      I see too many accidents likely attributable to mechanical issues happening with Russia. If only the Russians could get their mechanics up to, say, German standards.

      Then we might actually need to worry about them.

  7. Nels Nelson

    My wife , daughter and I like to take road trips. Our most recent one was during Thanksgiving week. One of the most enjoyable things about the trips is to go into the hotel bar or restaurant and meet people. We sat at the bar in the hotel where we were staying and introduced ourselves to the people sitting there. One of the men had grown up in the city and had come back for Thanksgiving. He knew the bartender and was there with other friends. During the course of our conversations we found out he worked for the FAA. I asked him somewhat jokingly if he wanted to talk about the 737 MAX. He shook his head and said no. That said we proceeded to as they say in my area “pass a good time”.

    At the end of the evening as we where all leaving he came over and shook my hand and I again in a lighthearted manner said: “are you sure you don’t want to talk about the 737 MAX”. Looking me in the eyes he said: “Don’t fly on it” then turned and walked away.

  8. Frank Little

    As horrible as Boeing’s conduct has been, it’s not irrational given the way the US government treats large companies. For all the talk of moral hazard when offering working people a few hundred bucks for groceries every month or more generous unemployment benefits, malfeasance and negligence by banks, defense contractors, healthcare conglomerates, agribusiness companies, and oil/gas have gone almost universally unpunished. Why wouldn’t the country’s largest manufacturer expect the government to bail them out of the mess they made?

    1. Mike G

      If Boeing the company suffers serious financial damage, look for a few rigged defense contracts to be steered their way regardless of merits. Darwinian economic competition is only for the little people.

  9. Noel Nospamington

    As a Canadian I am happy to see Boeing suffer in the long term and eventually go under, after they convinced the Trump administration to impose an illegal 300% tariff against the small Canadian plane maker Bombardier, which make it lose so many billions that placed it on the verge of bankruptcy and forced Bombardier to practically give away half of its C-series program to Airbus and move it plane assembly to Alabama in the USA.

    Note that as a percentage, Boeing receives far more American government funding and support than Bombardier does from the Canadian government, especially due to overly generous military procurements, and that Bombardier won its case against Boeing with both the WTO and USA IPC. Also note that Boeing does not do any passenger aircraft assembly work in Canada, even for Canadian airlines.

    Bombardier simply avoided bankruptcy by moving thousands of Canadian aircraft assemble jobs to Mobile Alabama, and practically giving away half of its C-series program, including the billions in R&D, to Airbus, in order to get European Union protection on illegal American tariffs. Any future illegal tariffs by the Americans against Bombardier would result in EU retaliation against Boeing.

    1. inode_buddha

      Thank you for raising this issue. As an American, I am mightily embarassed about this — I had no idea it was happening. But then you would be amazed at how much is never reported in the news here.

    2. PlutoniumKun

      As a European, I suppose we should thank Trump for allowing Airbus to make a quick killing by buying up the C-series on the cheap. I never understood why Boeing didn’t jump in at the opportunity – I guess they were too confident about the 737 and didn’t see the need.

      1. Noel Nospamington

        Honest most Canadians would rather see Bombardier go under than let Boeing acquire the C-series, due to the very bad blood generated by the illegal tariffs Boeing pushed the Trump administration to impose, and the likelihood that Boeing would likely relocate much more of Bombardier jobs outside of Canada than what happened with the Airbus deal.

        Unfortunately the Trump administration has also generated a lot of bad blood in Canada and elsewhere in the world, which in the long term will undermine American interests. Unfortunately Russia and China will be the primary beneficiaries of this.

        1. Ignacio

          Thank you for your interesting comments. I don’t believe the US can stand the damage that 4 more Trumpian years would inflict.

          1. drumlin woodchuckles

            If 4 more years of Trump can destroy the World Free Trade System and shrink the global economy enough to reduce carbon emissions to survivable levels, it might just be worth it.

        2. inode_buddha

          The situation reminds me very much of what Sam Brownback did for Missouri, it got to the point where his own legislature couldn’t abide him. And now Missouri is a third-world country.

          The rest of the US is following suit IMHO.

          1. J7915

            I think you mean Governor Brownback of Kansas.
            Wish he had been the ‘best mule in the stable’ in Missouri, and left his manure there, not moving to the State Dept. Amb for religious affairs.
            My inlaws have a farm in Kansas, regrettably the last liberals in the clan seem to have died out.

      2. fajensen

        As a European citizen, I have come to appreciate that there is real value in the way that Donald Trump makes it humanly and politically impossible for our leadership to keep pretending in public that the USA is a friend or even an ally of ours.

        If, or rather when, Donald Trump is reelected, there will be a much overdue political and economical realignment happening here in the EU.

  10. Dave in Austin

    This sad situation bears some resemblance to GE and Westinghouse, both industrial companies that tried to become finance companies.

    Whatever problems the old Boeing of Seattle days had, the company was run by people who loved airplanes. The transfer of the headquarters to Chicago changed the focus of the company; it became a finance company for Boeing airplanes in order to compete with the Airbus financing packages provided by the EU.

    But the cost of developing a new airplane was still very high. The basic 737 passenger tube was narrower than the Airbus tube, which converted into narrower seats and, I think, walkways. Boeing considered a total 737 redesign to compete with the Airbus but settled on modifications which left the old tube. The Max was, as designed, a fine- in fact a very fine- plane

    A company run by engineers that loved planes- the Seattle guys- would have factored-in scheduling delays which would run up the costs. But the “Finance Company” folks in Chicago once the financial packages were in place and the huge orders accepted, needed the panes to get out the door on time. The pressure was on to produce planes at a low price and the decisions (which are often close calls) led to one truly fatal error.

    Poor airlines in the third world wanted a basic, inexpensive plane. So Boeing produced a wonderfully sophisticated software package for the big airlines but then sold a “cut rate” basic plane to the third world with only one set of outside air measuring devices. If the one devise failed there was no backup. The standard configuration called for two air probes. If they gave different readings (meaning one probe had failed) the pilot was promptly informed and the fatal system disconnected.

    But in order to produce a cheap model for the third world the “two sensor” model was treated as an extra cost upgrade and the poor airlines didn’t order it. The old Seattle company run by fly-boys would never have sold the cut-rate planes; but the new Chicago Boeing run by accountants and finance people simply didn’t understand the dangers.

    There is something to be said for companies that love their product.

    In passing I should mention that many of the weaker airlines lease planes from companies that bundle huge orders to get the best prices. This is a boring business run by some very smart, interesting guys, at least a few of whom might, off the record, provide insights into how this tragedy (and 300 dead is a tragedy) happened.

    So if you really want to know what happened, talk to Steve Udvar-Hazy. Nobody loved America more than the kids who arrived here after the failed 1956 Hungarian revolt. Udvar Hazy went to school, started doing airplane leases, was honest and competent- and built the largest airplane leasing operation in the U.S., Then he gave his adopted country a half-a-billion dollars thank-you present by funding the Smithsonian Air Museum annex at Dulles Airport.

    I suspect that if you can get him to say anything it will not be about good guys and bad guys. It will be about nice, ordinary professionals going about their work… but for some professionals the work was getting the finance package done 1/32 of a point lower while for others the work was producing fine, safe airplanes.

    1. Carey

      >Poor airlines in the third world wanted a basic, inexpensive plane. So Boeing produced a wonderfully sophisticated software package for the big airlines but then sold a “cut rate” basic plane to the third world with only one set of outside air measuring devices. If the one devise failed there was no backup. The standard configuration called for two air probes. If they gave different readings (meaning one probe had failed) the pilot was promptly informed and the fatal system disconnected.

      As with the commenter above, you have your “facts” wrong. AOA disagree warning was (insanely!) optional whether for those dum furriners or smaht ‘Muricans, but, crucially, *either system* was dependent on one AOA device, feeding (insanely!) into one FCC… but shills are gonna shill, I guess. Carry on…

  11. Jokerstein

    Just another, but the largest, of the world’s most respected engineering companies going into the crapper due to MBAs taking it over. As an engineering nerd and aviation history fan, this is incredibly sad.

    1. Nameless

      The MBA rot now runs very deep at Boeing. A flush of the C suite would not remove it. Worse yet, management bonuses are now very large, and it becomes impossible to maintain a focus on reality when one will be handsomely rewarded for ignoring it. Plus engineers have also seen that lying, cheating and stealing will get you ahead so some have used it to advance their careers.

      It is much more than a shame. The world will need engineer companies that could do great things when sanity finally hits and the world starts working on GND projects, but this company may be too far gone to adapt.

      1. fajensen

        Plus engineers have also seen that lying, cheating and stealing will get you ahead so some have used it to advance their careers.

        Oh, I’d say that by this time most of them will be practicing the new ethics!

        What happens is that the honest, ‘high quality people’ will smell the sulphur on the winds emanating from management and quietly leave. Their replacements will be carefully selected by HR/Algos to ‘fit in well with the culture of the new organisation’ – which means that the new hiring will have a selection bias for: Liars, Backstabbing Rats, SoMe-posers, Sociopaths … with a good sprinkling of ‘Nice but Incompetents’ to round it off!

        The rumours will spread, once they do, the organisation will be really scraping the proverbial barrel!

        I am living this shit right now and it is not very funny at all!!

    2. .Tom

      And considering how much money Americans have invested in Boeing, and how much trust customers and passengers have given them, I feel betrayed as well as sad.

    3. Chauncey Gardiner

      Yes, incredibly sad. Think they finally had to stop MAX production due to the rising levels of unsold aircraft inventory in storage. Boeing management and the board have suspended stock buybacks after paying out a cumulative amount of around $50 billion since June 2013, but Boeing is still paying out cash dividends of $8.02 per share annually. Would have been nice to see at least some of that money put into R&D and quality control. According to MarketWatch, the company’s free cash flow went negative beginning in the second quarter, increasing to negative $3 billion in the third quarter 2019. The company’s total debt rose by around $20 billion during the first nine months 2019. All in all, not a good look.

  12. Tim

    “Yet the Boeing board seems so convinced of the company’s too big to fail status that…” Wait, they don’t think they can go bankrupt and into receivership with the federal government? There is arrogance and there is stupidity…

    Boeing will never go out of business, it’s too important to the economy, but it doesn’t mean the shareholders won’t be wiped out along the way, just like GM in the great financial crisis.

  13. VietnamVet

    Boeing is the natural outcome of the first oil crisis and the Reagan/Thatcher counter revolt that installed neoliberalism and financialization when western industrial capitalism ran out of cheap energy. Offshoring, deregulation, privatization and flushing of government down the drain was the outcome. The surprise is that society still functions for those who have money and how great it turned out for those who impact my waking dotage, Bill Gates and Jeff Bezos.

    General Michael Flynn just discovered that the Judiciary is compromised too. Boeing, PG&E or Purdue Pharma will never put safety first unless company executives are jailed for manslaughter. The revolt against neoliberalism underway in Chile will one day come to North America. The only question is how? A Boeing bankruptcy and closure is one. Or inevitably, there will be an economic collapse caused by all of the TBIF Voodoo Corporations kept going by drowning everyone else in debt and exhausting resources in a finite world.

  14. Synoia

    I presume MCAS was the best solution Boeing could find for the 737 MAX, as the flight characteristic was probably (or should have been) identified very early in the 737 MAX Development cycle.

    Now Boeing is trying to reinvent their best solution with a better solution. That appears difficult.

    A better, safer solution appears close to impossible.

  15. Math is Your Friend

    “Now Boeing is trying to reinvent their best solution with a better solution. That appears difficult.”

    I wonder if everyone has agreed on what constitutes a ‘better solution’ even now?

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