Less than four weeks after a hole burst in a Boeing 737 Max 9 jet during a flight, company executives face a thorny question: Should they focus on safety or financial performance?
The problem is looming as Boeing prepares to report its fourth-quarter results on Wednesday amid the biggest safety crisis in years. With the Jan. 5 incident on a Max 9 flight still under investigation, executives are weighing how much to discuss quality control while reassuring shareholders that the company is protecting their investments, according to two people familiar with the matter Persons.
The National Transportation Safety Board is expected to release a preliminary report this week on the incident, which occurred on an Alaska Airlines flight. The report could shed more light on how a panel crashed the Max 9 and will almost certainly increase scrutiny of Boeing from lawmakers, airlines and safety groups.
Boeing Chief Executive Dave Calhoun is expected to discuss safety with investors on the company’s earnings call Wednesday morning after the company’s earnings report, one of the people said. But it’s not clear what balance he and other executives will strike in their comments as they try to contain the fallout from the Max 9 incident.
The issue has taken on new importance after news reports, including a story in The New York Times, said Boeing employees opened the panel, known as a door plug, and then reinstalled it. Shortly after takeoff, the plug tore off the Alaska plane. This revelation suggests that the incident – which terrified passengers and forced the pilots to make an emergency landing – may have been caused by errors at a Boeing factory in Renton, Washington.
Some aviation experts and executives have long said Boeing’s safety problems and its financial performance are linked. These people say that for many years the company has placed too much emphasis on growing profits and enriching shareholders through dividends and stock buybacks and not enough on investing in technology and security.
Boeing’s focus on rewarding investors has led to quality and safety problems, its critics say, including two fatal crashes of the 737 Max 8 plane in 2018 and 2019 that killed nearly 350 people. Those accidents and the impact of the coronavirus pandemic have in turn hurt Boeing financially and allowed its main rival, Airbus, to stay ahead in sales.
“Boeing has been appointing CEOs lately who appear to be more focused on stock prices and dividends than on flight safety and production quality,” said Dennis Tajer, a captain at American Airlines and spokesman for the union that represents the airline’s pilots.
Boeing declined to comment.
How Boeing handles its latest crisis in the coming weeks and months could have far-reaching implications for its credibility with regulators, airlines and travelers, as well as its long-term financial performance.
Investors fear the latest crisis could derail Calhoun’s plans to put Boeing on firmer financial footing. The company’s share price has fallen about 19 percent since January 5.
Airline executives, federal regulators and safety groups have expressed increasing frustration with Boeing and its repeated safety problems.
Mr. Calhoun, who took over as chief executive in January 2020 after serving on the company’s board for years, promised at the time that the company would “get better” and “we would be committed to maintaining the highest standards of safety and quality.”
Robert Isom, American Airlines’ chief executive, told Wall Street analysts last week: “Boeing needs to get its act together.” He added: “The problems that they’ve had recently, but also for several years, are unacceptable.”
Adding to the sense of urgency for Boeing, the Federal Aviation Administration said last week that it is restricting Boeing’s ability to increase production of all 737 Max planes, including approving additional assembly lines, until the company demonstrates that it is Solved quality control problems.
The agency has allowed Max 9 planes it grounded after the Alaska incident to resume flying after inspections. United Airlines and Alaska, the only two U.S. airlines that fly the Max 9, have started using the planes again in recent days.
Federal investigators are focusing in part on the question of whether the two pairs of bolts that were supposed to hold the door stopper to the plane’s body were installed. No screws were recovered.
The circumstances of the Alaska Airlines incident are different from those of the Max 8 crashes: No serious injuries were reported, and the issue appears to involve manufacturing rather than design. But Boeing’s approach to its quarterly earnings report in April 2019, just weeks after the second Max crash, could serve as a template for Boeing executives on Wednesday.
During that conference call, Dennis Muilenburg, the company’s then-chief executive officer, spent several minutes talking about safety and quality rather than Boeing’s financial performance.
“Recent events have highlighted to us the importance of our enduring values at Boeing: safety, quality and integrity, especially in the difficult times we now face,” Mr. Muilenburg said at the start of the conference call. “Our work requires the highest level of excellence.”
Analysts expect Boeing will try to convince stakeholders of its commitment to safety.
“In our view, investors are a secondary audience for Wednesday’s call, as regulators, members of Congress and their staffs, and the press and public are all important audiences that Boeing needs to address, with a likely focus on processes to ensure safety “and quality,” JP Morgan analysts wrote in a note on Monday.
Mr. Calhoun has indicated that he is not currently focused on Boeing’s financial performance.
“This is not the time to talk about what I can and cannot achieve in terms of deliveries,” he said in an interview on CNBC on Jan. 10, in response to a question about ramping up production of the Max planes. “My job at this time is solely to understand and resolve the security issue.”
Peter Eavis contributed reporting.
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2024-01-30 17:17:15
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