Boeing is Struggling to Stay Airborne

Pun intended

I was recently reviewing several companies for a year-end feature I may or may not end up publishing, and I sought to find which companies had the best 2024 and which ones had the worst. There were a few to consider for both, and one was most definitely in the lead for the worst: Boeing. As a result, I decided to dedicate a paragraph this week to how one of the airline and military industry giants has been hurt the way it was.

However, the more I researched for this article, the more I found out about the issues that plagued Boeing, and the longer this article ended up taking to write. I took an extra day to iron out my thoughts (with the excuse of yesterday being Labor Day), and hopefully, the end result is worth reading.

Boeing Disasters

Boeing is no stranger to airline controversies. For anyone who remembers the ancient days of 2018 and 2019 (already five and six years ago somehow), its brand new 737 Max’s crashed twice, killing all 346 people on board. This was not the first major Boeing disaster of the modern age, and it wasn’t the last.

In 2024, Boeing went through enough controversies to make an entire book out of them. Perhaps the most notable, however, was when the door panel for a 737 Max ejected midflight. Additionally, a whistleblower claimed that the fuselages of the 777 and 787 were improperly manufactured. Additionally, the death of a few prominent whistleblowers, most notably John Barnett, definitely cast a suspicious eye on Boeing.

The cherry on top was Boeing’s Starliner, which was deemed to be risky in returning astronauts to Earth, and NASA chose instead to work with SpaceX for their return to Earth. Additionally, the American government is investigating Boeing for not following proper safety standards when developing its airplanes, and reports suggest that company morale is at all-time lows; Boeing is definitely in a bit of a pickle right now.

It was not a short road to get here, but Boeing’s corporate management has made several bad decisions over the decades to get them to this point, and all of it started with a bad acquisition in 1997.

Harry Stonecipher

In the early ‘90s, Boeing was based in Seattle and quite a different company from the Boeing of today. Notably, they were known for a culture of engineering first and were (ironically) known for their rigid compliance with FAA standards, something that made them quite legendary within the aviation and military industries. While they did use well-audited sub-contractors, they assembled their major parts internally, building them with strong standards.

In 1997, they purchased and merged with McDonnell Douglas, a Midwest aerospace giant. McDonnell Douglas formed itself through a merger of two World War 2-era giants, McDonnell Aircraft and Douglas Aircraft Company.  It frequently worked on government contracts and military aviation projects, the reason why Boeing sought to purchase the firm.  McDonnell Douglas was not the best reputed for its commercial aviation business.

By most accounts, what followed afterward seems to be a clash of cultures. McDonnell Douglas often chose to subcontract a lot of their work for parts. Additionally, their then-CEO, Harry Stonecipher, was known for his profit-oriented moves. These cultures clashed, and it seemed McDonnell Douglas’ side won, ending symbolically with Boeing moving its HQ to Chicago, much closer to the Midwest heartland of McDonnell than the Pacific Northwest of Boeing. 

Harry Stonecipher became the CEO of the new Boeing within about half a decade. Whether positive or negative, Stonecipher remains one of the most influential CEOs in Boeing’s modern history. Stonecipher was chosen as he was viewed as a more stable and ambitious option after the public controversies of Phil Condit, his predecessor. In order to make Boeing recover and remain competitive against Airbus and other rivals, he pushed strongly for the new 787 Dreamliner to be built using subcontracted parts.  Boeing allowed these sub-contractors to audit and use further sub-contractors.  The short-term results of this action helped pull Boeing out of their downward spiral and even made them quite valuable in the eyes of shareholders and investors.

Additionally, he began to place more and more McDonnell Douglas employees in high-level Boeing positions, especially (and crucially) in the financial team. He also adopted cost-cutting policies, often directing such wrath to Boeing’s engineers, starting a semi-public feud between some of Boeing’s top management and its engineers that greatly dampened Boeing’s success in the long term.

Stonecipher ended up retiring in 2005 after it was discovered that he had inappropriate relations with a Boeing employee (which ended up causing a divorce with his wife since 1955), but the profit-first mindset and cost-cutting measures that he put into place continued with his successor Jim McNerney.  McNerney took this to new heights and focused a lot on Share buybacks to boost investor returns.  With money that needed to be used for ensuring quality of the planes that Boeing Built.

The 737 Max

In order to be competitive with Airbus’ A320 neo, Airbus announced the 737 Max.  Boeing marketed the plane to be very similar to their 737.  They pushed for pilots not to need to be certified for the 737 Max.  But in fact, the 737 Max had a new system called the MCAS (Maneuvering Characteristics Augmentation System), which should have required additional training. The MCAS is an automated system that controls the plane's elevator and adjusts the angle of attack because of the forward and higher placement of the new, bigger engines.  The MCAS sometimes worked erroneously when there were issues with the angle of attack sensor.  Pilots were unaware of how to handle the plane when the MCAS malfunctioned. Two airline crashes were caused by it that cost the lives of 346 innocent people.

Boeing’s corporate management should have learned the lesson from the 737 Max tragedies but did not. Reports suggest it continued its shoddy cost-cutting measures and seems to have used unaudited sub-contractors, and its lengthy list of 2024 controversies shows that, with a potential strike of 32,000 workers only adding to their woes.

The Future

Thankfully, there are some signs that Boeing may move in a positive direction. Their incoming CEO, Kelly Ortberg, has chosen to base the company in Seattle, their pre-McDonnell Douglas HQ, and has recently met with the chief of the FAA. Then again, such positive signs are meaningless gestures until Boeing actually puts in the work to fix the problems.  Steps need to be taken to build a work environment where innovation and quality take the driver’s seat.  The long-term security of its workers and customers needs to be taken seriously. If it does this, I have no doubt they can hold onto their position as one of the leaders in the aerospace industry. 

The company has focused on short-term profits over the past two decades, which has led to its current long-term challenges.  And it is behind us. As Warren Buffett once said, "In the business world, the rearview mirror is always clearer than the windshield." Despite these challenges, let's hope that Boeing is committed to learning from the past and will work to build a better future.