source: aviation24.be
This has been a year of upheaval and change for Boeing and could be described as the year Boeing failed. From an operational, financial, productivity, and managerial perspective, 2024 will be remembered for multiple failures. The company failed to deliver a safe aircraft to Alaska Airlines that miraculously did not crash, management was unable to institute the cultural changes needed to improve quality, failed on its mission to the International Space Station, failed to improve toxic labor relations, endured a strike, and failed to generate cash after years of financial engineering backfired and decimated the company’s balance sheet.
Four major themes dominated the news in 2024: the Alaska 1282 door blowout, a leadership change, the stranding of astronauts, and the IAM strike. While these themes also dominated the news, they also engendered several other changes, ranging from legal and regulatory actions that dramatically impacted bottom-line financial results to changing schedules and timelines for certifications and deliveries..
FIRST QUARTER
It didn’t take long for things to happen in 2024. The bad news for Boeing began on January 5th, when Alaska Airlines flight 1282 from Portland to Ontario experienced an explosive decompression after a door plug came off a MAX 9 aircraft. Fortunately, no fatalities resulted, as the aircraft was only at about 12,000 feet in altitude when the incident occurred. Had this happened ten minutes later, the aircraft would likely have been at cruising altitude with potentially catastrophic results.
The NTSB investigation of the incident showed evidence that screws designed to hold the cargo door in place had been removed and not reinstalled during assembly at the Boeing factory in a highly significant quality lapse. Apparently, neither the mechanic assigned to install the bolts nor the inspector who should have ensured that they were installed performed their duties as required. Boeing was quite fortunate that the 171 passengers and six crew on the MAX 9 survived without major injuries or fatalities after it failed to build a safe airplane.
January 6th brought FAA mandated inspections and grounded all MAX 9 aircraft indefinitely in the wake of the door panel blowout. The result was additional inspections and cash payments to airlines after the grounding. This was Boeing’s third safety grounding in a little over a decade, after no groundings in the industry since the DC-10 in the 1970s. Boeing’s safety record, already poor for the MAX as a result of two fatal crashes, took another huge blow after their manufacturing failed to build a safe airplane.
January 7th was a date of record that could haunt the company. This date marked a legal deadline, resulting from the earlier MAX 8 crashes in 2018 and 2019 in Indonesia and Ethiopia that killed 346 people.
The US Department of Justice and Boeing agreed to a Deferred Prosecution Agreement under which, if Boeing operations were clean for three years, beginning January 7, 2021, the agreement would stand fulfilled, and no prosecution would occur. Boeing missed being home-free by two days and was found to have failed to meet the requirements the agreement. Boeing faced a renegotiation of the agreement, likely with tougher provisions or a criminal trial that would air all its dirty laundry.
January 8th brought the news that Alaska Airlines and United Airlines found loose bolts after inspecting their MAX 9 aircraft door plugs, indicating yet another significant ‘quality escape’ at Boeing.
On January 9th, Boeing CEO David Calhoun stated that “Boeing has to demonstrate that our aircraft are safe” in a speech that acknowledged the company’s mistake that led to the Alaska Airlines door plug blowout. Unlike the two earlier MAX crashes, Boeing quickly stepped up to the plate to admit responsibility, as the evidence would soon show.
The FAA increased its oversight of Boeing on January 13th, and it investigated how Boeing could deliver an unsafe 737 MAX 9 to Alaska Airlines.
On January 14th, Alaska Airlines introduced enhanced oversight of Boeing production. They increased internal personnel presence at Boeing and Spirit AeroSystems to audit and monitor production quality and control processes.
Our AirInsight editorial of January 19th stated that Boeing needed a leadership change. David Calhoun failed to improve safety during his tenure as CEO. The company was late and over budget on virtually all development programs, and a toxic company culture was not being addressed. In our view, a leadership failed and a change had become a necessity.
On January 20th, the FAA extended door plug inspections to the 737-900ER model from the prior 737NG series of aircraft in addition to the MAX 9, causing further industry concern.
By January 23rd, it was becoming clear that an exemption for the engine de-icing system for the 737 MAX 7 and MAX 10 that Boeing had requested would be unlikely to be approved by the FAA. This resulted in the certification of the two remaining models in the MAX family moving to the right from 2024 into 2025, as Boeing withdrew its exemption request.
The FAA cleared the MAX 9 to fly again on January 24th, but blocked an expansion of production at the Renton facility. The production cap would result in deferred customer deliveries and penalty payments when Boeing failed to deliver aircraft on time.
On February 21st, Boeing announced the departure of Ed Clark, Vice President of the MAX program and General Manager of the Renton facility where the MAX is assembled. This was likely a result of the errors that led to the door plug blowout.
On February 27th, a scathing report from a Congressional Review of the FAA use of the Organization Designated Authorizations process at Boeing. The team reviewed 4,000 pages of Boeing documents, interviewed 250 Boeing individuals, and conducted seven surveys in their process. Their conclusions were neither positive nor flattering for Boeing.
On February 28th, a new safety issue related to the engine de-icing system emerged on the Boeing 787 Dreamliner The durability of the seals came into question, and in a worst-case scenario, if they failed, the front of the engine pod could separate from the aircraft. Airlines were given 30 months to complete inspections, given the extremely low probability associated with the issue and the relatively young fleet.
On March 1st, leaks indicated that Boeing was interested in re-acquiring Spirit AeroStructures, a company it spun off in 2005. Spirit builds the fuselages for the 737 MAX family. Spirit Aero’s quality issues were also impacting ‘traveled work’ at Renton to fix issues with incoming fuselages that failed to meet specifications.
On March 4th, American Airlines ordered 85 737 MAX 10 aircraft, plus 50 options, and converted 30 of its MAX 8 orders to MAX 10s. The carrier also ordered 85 A321neos from Airbus, splitting the deal between the two major players. The order, however, was a shot in the arm for Boeing that reflected continuing customer confidence.
On March 5th, Ethiopian Airways ordered eight Boeing 777-9 aircraft, with options for 12 more. That program remains mired in an extended certification process and is five years behind its original 2020 schedule.
On March 9th, Boeing whistleblower John Barnett, who was scheduled to testify in a deposition, was found dead in his car with a gun in his hand in what police concluded was an apparent suicide. Despite suspicions, no investigation of potential foul play was conducted.
On March 11th, the FAA issued an Notice of Proposed Rule Making (‘NPRM’) for a potential airworthiness directive related to the non-conforming installation of spoiler wire bundles, which could potentially result in unintended spoiler deployment. This was another potential ‘quality escape’ in a disturbing pattern.
On March 19th, Boeing’s CFO indicated during a preview of quarterly results that the company would face a massive free cash flow problem due to the January grounding.
On March 20th, several airline CEOs sought meetings with Boeing’s Board without the CEO present, indicating a lack of confidence in David Calhoun’s leadership. It became apparent that Boeing’s key airline customers wanted a leadership change.
On March 25th, significant management changes at Boeing were announced, with CEO David Calhoun stepping down by the end of 2024, Board Chairman Larry Kellner resigning after the annual shareholder meeting in May, and Stan Deal, President of Boeing Commercial Airplanes, resigning immediately. Steve Mollenkopf, a director since 2020, was elevated to Chairman of the Board, and Stephanie Pope took over as President of the commercial aircraft unit.
On March 28th, the President of the United States quipped that he “doesn’t sit by the door” of Air Force One, making the company the butt of jokes and sinking to a new low for its reputation for building safe aircraft.
Boeing’s first quarter was a disaster, setting the tone for the rest of the year. The company’s performance did not improve in the second quarter.
SECOND QUARTER
The second quarter was marked by the search for a new CEO and yet another major failure for Boeing, this time the Starliner transportation system to deliver astronauts to and from the International Space Station. During the quarter, several adverse events, from whistleblowers to additional “quality escapes” kept Boeing in the news.
On April 3rd, Boeing’s first Starliner manned launch was delayed for a second time until May 6th.
On April 4th, Alaska Airlines revealed that Boeing had compensated it with $160 million after the MAX 9 grounded in January.
On April 8th, details of David Calhoun’s $32 million pay package emerged. Many observers felt that the package was undeserved, given the company’s massive failures during his term, particularly the door plug blowout in January.
On April 10th, a new whistleblower emerged alleging structural flaws in Boeing 777 and 787 aircraft. In addition, an American Airlines pilot criticized the company, stating that ‘airplanes are not like IKEA furniture.’ As a result of the whistleblower’s testimony before Congress, Boeing’s CEO will be subpoenaed for a committee hearing.
On April 12th, Boeing approved the use of “dish soap” in manufacturing, raising eyebrows and indicated the depth of the problems within the company’s supply chain.
On April 24th, Boeing announced its first-quarter loss and a cash burn of more than $3.9 billion. The MAX 9 debacle, grounding, and production halt cost the company dearly, as it lost $355 million in the quarter.
On April 28th, DOT Secretary Pete Buttigieg said that Boeing must improve safety and quality before increasing 737 MAX production – which the FAA limited to 38 per month at the maximum.
On May 2nd, a second Boeing whistleblower died at age 45 from a fast-spreading illness. Despite no evidence of Boeing’s involvement, conspiracy theories began to spread.
The Starliner launch was scheduled for May 6th, but due to technical issues, the mission was scrubbed a couple of hours before liftoff.
On May 8th, the FAA opened a new probe of the 787 after Boeing discovered and reported that employees were signing off and falsely claiming that required testing was accomplished, a practice called ‘pencil-whipping.’ Also another 10 whistleblowers are ready to corroborate the quality and safety lapses in the wake of two whistleblower deaths.
On May 10th, the Securities and Exchange Commission announced it would investigate Boeing and the safety claims made before the door plug blowout on Alaska Flight 1282. This added yet another regulatory and legal issue for the company.
On May 14th, the DOJ found officially that Boeing breached its deferred prosecution agreement, re-opening the case. Boeing also delivered its 1,500th 737 MAX aircraft.
The Starliner launch was pushed back to May 25th due to helium leaks on May 17th. On the same day, the Board approved David Calhoun’s pay package and re-elected him to the Board despite his announcement that he would depart before year-end.
On May 20th, Boeing’s 767F was exempted from climate rules, enabling production to continue for UPS and FedEx customers through 2029.
May 21st brought severe turbulence on a 777-300ER flight from London to Singapore. The aircraft dropped 6,000 ft., and one passenger was killed, and 30 others required hospitalization. The timing couldn’t have been worse for Boeing, trying to recover from the January incident.
On May 24th, Boeing revised its guidance to negative cash flow for the year and a minor electrical flaw in the 777 was overplayed by the tabloid press.
By May 28th, we were reporting more turbulence for Boeing, both physically and financially. A Qatar Airways flight experienced severe turbulence with several injuries on a 787 Dreamliner. On the financial side, the upside included a new $7 billion USAF contract, but a new safety and culture plan is also due to the FAA. This plan took Boeing 90 days to develop and will likely take as long for the FAA to review and analyze.
On May 29th, despite more leaks in the “leak a week” Starliner, the capsule was cleared for launch to the ISS in early June.
On June 6th, the Starliner blasted into orbit and docked with the Space Station on the 7th. However, leaks and thruster issues emerged during a longer-than-normal docking process, causing concerns at NASA.
Another whistleblower emerged at Boeing. About 30 have been identified and are preparing to share their stories regarding quality and safety issues.
On June 7th, a white paper from the Rock Center for Corporate Governance at Stanford University released a report centered on Boeing’s leadership and cultural failures. This was not a positive for Boeing.
June 11th brought an order from El Al, selecting the 737 MAX for its narrow-body fleet replacement.
On June 13th, the FAA indicated that Boeing would face ‘enhanced scrutiny’ in the foreseeable future, which did not bode well for rapid production ramp-ups.
June 14th brought another rudder incident for the 737 MAX, which has also been problematic on the 737NG and 737 Classics. The investigation focused on the rudder power control unit, or PCU.
On June 17th,, Boeing told its suppliers to slow deliveries, delaying its three-month ramp-up increases. Most of the supply chain had already factored this into their internal estimates, as Boeing’s estimates began to have limited credibility with their supply chain. Suppliers whipsawed by Boeing’s ups and downs became increasingly frustrated.
The investigations at Boeing also kept growing, with the FAA, NTSB, DOJ, SEC, and Congressional Committees now investigating the company. The number and depth of investigations are occupying precious senior management time to implement quality and cultural changes.
On June 19th, details emerged about the further delay in the Air Force One replacement program and NASA extending the Starliner’s stay at the ISS until late June.
June 20th brought damaging testimony before Congress that CEO David Calhoun knew about Boeing’s retaliation against whistleblowers but never bothered to speak with a single whistleblower during his tenure.
June 24th brought yet another delay in the return of the Starliner, as well as indecision by the DOJ, whose US prosecutors want to bring criminal charges against Boeing while senior officials and Boeing want a new deferred prosecution agreement.
On June 26th, Leonardo shut production of 787 components for four months in response to Boeing’s rate cut.
On June 27th, another whistleblower spoke about forward pressure bulkhead supplier quality issues on the 787.
June 28th, the NTSB implemented sanctions against Boeing after the company publicly revealed details of the investigation of the Alaska 1282 door plug blowout incident. The sanctions excludes Boeing from investigative reports and data, with a referral to the DOJ for criminal prosecution. Somehow, the culturally secretive Boeing suddenly decided to become transparent with data prohibited from public disclosure.
The 28th also revealed a nosedive by a Ryanair MAX similar to two earlier dives by Southwest MAXs that are the subject of further investigation. This raised the question of whether there is another potentially fatal flaw with the MAX series of aircraft, which the FAA and EASA will investigate.
THIRD QUARTER
The third quarter brought new leadership to the company, with Kelly Ortberg, former CEO of Rockwell Collins, taking the helm. As an outsider, Ortberg is well aware of the need for cultural change and brought a breath of fresh air to the CEO’s office, which he will move back to Seattle.
The third quarter also saw the embarrassing decision to return the stranded astronauts via Boeing’s competitor, SpaceX, after the Starship continued to have helium leaks and thruster issues. Boeing failed its test to qualify for additional space station launches and will not have the opportunity to try again before 2026.
On July 1st, Boeing and Spirit AeroSystems agreed to an acquisition price of $4.3 billion. On that day, Alaska Airlines also formally returned the airplane involved in the door plug blowout as defective for a refund.
On July 8th, Boeing accepted a “sweetheart” plea deal with the DOJ in which the company pled guilty to felony fraud but had weak punishment for the company, much to the consternation of victim families, who were lobbying for large fines and jail time for Boeing execs.
July 9th brought a new FAA-mandated inspection for 2,600 Boeing 737 aircraft, including the MAX, regarding oxygen mask safety concerns.
July 10th saw another NASA delay to Starship’s return from the ISS as it examined the leak and thruster issues.
On July 15th, Boeing and former CEO Dennis Muilenburg paid a combined $201 million in fines to the Securities and Exchange Commission for making false statements in the wake of the 737 MAX crashes in 2018 and 2019. The day also saw Boeing win approval to begin certification flight testing for the 777X.
On JulOn y 17th, a major comedian commented that a politician had “less integrity than a Boeing 737” underscoring how far the company’s reputation has fallen.
July 20th reported a third descent to unsafe altitudes with 737 MAX at Southwest Airlines over the last few months. While it is unknown whether this is an aircraft or training issue, it raised alarms about the carrier’s MAX operations. The latest incident had an aircraft descend only 150 feet above Tampa Bay on a landing approach.
Boeing settled on the 737 MAX 7 and MAX 10 anti-ice system redesign on July 21st and moved to the flight test phase of certification, which is now expected in 2025.
July 25th brought the details of the new plea agreement between the Department of Justice and Boeing resulting from the two MAX crashes. Under the agreement, Boeing plead guilty to conspiracy to defraud the United States and pay a fine of $243.6 million. The company will also serve a three-year term of organizational probation and invest $455 million in compliance, quality, and safety programs with an independent compliance monitor overseeing that process. The agreement must still be approved by Judge O’Connor in the Northern District in Texas, who can approve or reject the deal.
Boeing reported its Q2 results on July 31st, which were a disaster. The company reported a $4 billion cash burn during the quarter and more than $8 billion year to date.
Kelly Ortberg was announced as Boeing’s new CEO on July 31st. The former CEO of Rockwell Collins came out of retirement to take on the challenge of turning around the world’s biggest aerospace company.
August 1st brought a new FAA airworthiness directive for all 787 models to inspect for potential cracks in landing gear components.
August 8th was the first day for new CEO Kelly Ortberg, who decided to move his office to Seattle to be closer to the company’s key operations. During his first days on the job, he visited these operations. The NTSB concluded a two-day hearing in which Boeing executives neither knew how the oversight in not reinstalling bolts occurred nor could guarantee that it would not happen again.
August 12th brought another quality escape on 737 MAX, this issue with junction boxes and “nonconforming components installed on three airplanes”, leading to their grounding. Boeing did not stop production and will rework any impacted aircraft.
August 15th saw the 777X grounded for a thrust link problem with the aircraft. As of mid-December, new links are finally scheduled to be installed, more than four months after the issue was discovered, to see if new parts solve the problem.
August 21st revealed a pilot seat problem on a LATAM 787 flight, requiring inspections of 895 Boeing 787 aircraft during the busy summer season. While not a major issue, these new inspection requirements were disruptive to airline operators, potentially impacting 64,000 flights.
On August 24th, NASA and Boeing decided not to return the astronauts via Starliner but to use the competing SpaceX capsule instead. Although the parties disagreed, NASA was paying the bills and has the final say.
The Seattle Times released an investigative report on August 25th about the manufacturing chaos that prevailed during the assembly of the 737 MAX 9, which experienced the door panel blowout, and how the Boeing quality system failed to discover the problem.
August 30th, United Airlines explained why it would not buy the 777-9, feeling the aircraft, like the A380 it replaces, would be too large. The 777X is not gaining traction among US carriers, leaving larger aircraft operators in the Middle East as key customers, but igniting concern among analysts that the 777X will not sell as well as the original 777, despite the market doubling in size during that interval.
Boeing and NASA had a major disagreement on September 2nd, and the agency decided to bring the Starliner capsule home from the International Space Station on September 6th. Unfortunately, the evidence of leaks will burn up in the atmosphere as the capsule returned. New CEO Kelly Ortberg also met with FAA administrator Michael Whittaker to discuss increased oversight requirements and production ramp-up restrictions.
September 4th saw a major downgrade in Boeing stock from Wells Fargo to its lowest rating, essentially saying sell the stock. While this was an anomaly among stock pundits, the drop in stock performance for the remainder of the year proved this to be prescient.
The Boeing Starliner returned safely to Earth on September 7th, without the two astronauts who were stranded on the ISS. During the return, an additional thruster failed,, and the guidance system experienced a temporary blackout, underscoring why NASA decided not to bring the astronauts back on the Starliner capsule.
On September 10th, Boeing finally realized that its production goal of 38 aircraft per month would not be met, deferring supplier requirements by six months. The NASA post-return press conference, scheduled for three NASA and two Boeing representatives, went ahead without the Boeing representatives, who declined to participate and face embarrassing media questions.
September 13th was not a good day for Boeing, as the IAM voted 96% to strike and 95% to reject the contract union leadership recommended. Boeing production for the 737 MAX, 767F, 777, and KC-46A were impacted, while 787s produced at the non-union plant in South Carolina are not affected.
September 16th brought a judgment in the Embraer arbitration resulting from the failed merger between the parties, resulting in Boeing paying Embraer $150 million in damages. It also brought comments from the stuck astronauts; astronaut Butch Wilmore expressing that he was not comfortable returning in the Starliner capsule.
September 19th brought the announcement of rolling furloughs at Boeing during the strike, with many employees working three out of four weeks and one week unpaid due to cash constraints. This date also announced a 50 737 MAX order from CDB Aviation to be delivered between 2028-2031. The week before, CDB placed an 80-aircraft order with Airbus, which took 60% of the company’s narrow-body orders.
On September 23rd, Boeing replaced the CEO of Boeing Defense, Space and Security. Ted Colbert became the first major executive change in the Ortberg era, as the defense unit faced continued massive losses on fixed price contracts and the embarrassing failure of the Starliner in space operations, stranding astronauts on the International Space Station. The buck stopped with the business unit CEO, who was asked to step down.
September 25th brought the new comments by the FAA Administrator that changes at Boeing will take years rather than months and that the FAA expects implementation of new processes to require three to five years. The impact of that timeframe on Boeing production rates was not discussed.
The launch of the Crew 9 rescue capsule marked September 30th. The capsule docked with the ISS on October 1st, and the stranded astronauts now have their ride home. But they will need to wait until February, and now March, to use it as the next capsule to replace it, and be in place for ISS emergencies, is still under construction. So Sunni and Butch have become the ‘Gilligan’s Island’ of Space, with their 8 day tour extending to nine months.
FOURTH QUARTER
The IAM Strike at Boeing dominated the fourth quarter, which brought production of the 737, 767, and 777 to a halt. Labor relations at Boeing have been contentious over the last two decades, and militant labor was not going to let an opportunity to reverse the impacts of an inferior prior contract go by the wayside. The IAM held out through multiple offers to win a 38% raise over four years and improved benefits in a clear win for the union.
October 7th illustrated Boeing’s traditional lack of transparency. Through an Italian prosecution for an event three years ago, we learned that flawed parts were installed on Boeing 787 aircraft. Boeing, Leonardo, and the airlines involved knew of the problem, but the news media remained in the dark, as Boeing cover-ups continued as an integral part of the culture. This is something Ortberg will need to change.
October 8th demonstrated the FAA’s continuing failure to monitor Boeing. India’s DGCA ordered inspections faster than the FAA to address a potential rudder problem on several 737 models. The FAA’s oversight of Boeing has been weak, and it is rightly questioned on Capitol Hill.
Boeing announced 17,000 layoffs and a MAX 10 delay on October 13th. Many industry pundits raised concerns that, with programs running late and aerospace talent in high demand, replacing laid-off employees when the ramp-up occurs will be difficult. Delta Air Lines also revealed that its MAX 10 orders will be delayed, as the program might now be certified in 2026.
October 15th had Boeing cutting health care for striking workers and signed a $10B debt line. The distrust between IAM and Boeing management was taken to another level when Boeing cut off health care from striking employees. This did not reflect a change in Boeing’s culture, plagued by decades of distrust.
The company also arranged for an additional $10 billion debt line, which, with a planned equity raise, will provide a cash cushion through 2025.
October 17th saw NASA push the next flight for Starliner into 2026. Despite a safe return of the Starliner capsule, NASA has pushed the next launch back by a year because of the issues with thrusters and helium leaks. This prevents Boeing from completing its requirements and qualification for Space Station launches until 2026. That delays cash flow and eliminates potential paid missions, which will go to SpaceX in the interim.
October 21st brought the breakup of a Boeing-built satellite in orbit. A satellite built by Boeing operating for Intelsat exploded in space and broke up in geostationary orbit. The resulting debris represents a potential hazard for other satellites in orbit. The reason for the explosion is not yet known but it appears to be yet another “quality escape” for the company.
October 23rd brought a vote on a new contract offer from Boeing. A vote of 64%-36% soundly rejected the company’s revised offer, a blow to the company that had sweetened what it initially said was its ‘best and final’ offer. That strategic blunder by the company increased distrust between the parties.
In addition, two Ohio pension funds joined the suit against Boeing,, stating that the company prioritized profits over safety. Given the prior guilty plea for fraud in the deferred prosecution agreement, Boeing will find it difficult to defend itself, which may expose the company and its former executives to financial recovery by the plaintiffs.
Boeing completed its capital raise on October 30th. The additional $21 billion should enable the company to operate into 2025 despite massive losses during the strike. However, a number of significant tasks and unknown circumstances remain. Boeing accumulated large inventories of fuselages and engines during the strike and needs to build aircraft at higher rates.
On November 1st, Boeing did not participate in or exhibit at the Zhuhai Air Show in China, as it traditionally does, due to cost-cutting. With US-China trade relations on shaky ground, this may not result in any loss of business for Boeing, which is unlikely to receive a significant share of new Chinese aircraft orders.
November 5th brought an end to the IAM strike. IAM members received a whopping 38% wage increase over four years, a $12,000 signing bonus, and improved 401K plans after a seven week strike that crippled Boeing’s production of aircraft in the Pacific Northwest, particularly the best-selling 737 MAX.
November 12th brought the resignation of Boeing’s head of quality. Elizabeth Lund, a 33-year veteran at Boeing who was given the quality portfolio after the door blowout in January. Notably, she violated FAA protocols by publicly disclosing information on an investigation in progress, resulting in Boeing being barred from full participation.
On November 14th, Boeing reported a $9.66 billion loss for the first three quarters. Boeing’s quarterly financial performance remained abysmal while losses were lower than those in the first half of the year. Nonetheless, the losses required a capital raise of more than $21 billion in October to provide an adequate cash cushion to sustain operations.
The planned 17,000 layoffs began on November 15th in Washington State. The first ‘pink slips’ were delivered to white-collar employees in the Seattle area. The 17,000 layoffs represent 10 percent of the workforce. Is the ghost of Jack Welch still present at Boeing?
November 18th saw Spirit AeroSystems sell Fiber Materials for $165 million. Spirit Aero, which has an agreement to be acquired by Boeing, needed to improve its poor cash position. Spirit Aero had already received advanced payments from Boeing to maintain operations during the strike.
November 26h brought a new tanker order and a surprising fleet sale. Boeing received a $2.4 billion order for additional KC-46A tankers from the Pentagon, while China Southern decided to sell its fleet of 10 Boeing 787-8 Dreamliners, with Air India a potential customer. It is pretty unusual for an airline to dispose of a fleet of aircraft that are relatively young. The 787-8 has the highest seat-mile costs. China Southern continues to operate the 787-9.
New internal travel restrictions were implemented on December 1st as the company continued to focus on cost-cutting. Boeing’s 19-member Executive Council, accustomed to traveling on the company’s fleet of business jets, have been relegated to economy-class commercial flights.
December 3rd brought an LOI for 100 737 MAX from Hungary. With Chinese funding and a China focus, a new carrier based in Budapest selected the 737 MAX with plans to order up to 100 aircraft.
December 5th brought the rejection of the DOJ-Boieng deferred prosecution agreement. The Federal judge in Texas rejected the plea deal under which Boeing would have pled guilty to a criminal felony to defraud the FAA was thrown out. The rationale, in my opinion, focused on the ‘independent monitor’ who would have been appointed to oversee Boeing’s process changes and had too little authority to ensure that recommendations were implemented and that DEI should not be a factor in the selection of said monitor.
The parties must renegotiate a new plea deal that is acceptable to the Judge or face a criminal trial for fraud resulting in 346 deaths, something that Boeing certainly wants to avoid but the victims’ families are advocating. We expect a revised agreement to be strengthened and likely approved by the judge.
Boeing’s Head of Public Relations resigned on December 8th. The departure was announced immediately, which is atypical for voluntary departures; we suspected another bombshell was about to drop.
December 9th brought significant additional attention to Boeing’s quality issues. CBS popular news-magazine show 60 Minutes featured Boeing whistleblowers, including a whistleblower who stated that non-conforming parts were repeatedly used in newly built Boeing aircraft at the factory to speed deliveries, in violation of FAA regulations. These non-conforming parts, which should not have been installed, were described by the whistleblower as “Russian Roulette” and that it may be a matter of when, not if, a component failure results in a serious problem. More than one whistleblower reported issues on the 737 MAX and 787 Dreamliner programs.
December 10th brought the elimination of a surveillance system in Boeing facilities. A surveillance system for Boeing facilities to help optimize HVAC costs was leaked by the Seattle Times and resulted in the “postponement” of installing the system at additional facilities and removing them from facilities that already had the system installed. While Boeing claimed that the system had blurred photos, reports indicated that individuals could be identified and even writing on a desk could be read. Given Boeing’s history of distrust with employee relations, this was a setback on the company’s road to cultural change due to a lack of transparency.
On December 11th, it was revealed that production of the MAX was resuming. The announcement that production had been stopped may have only applied to new fuselage inductions, as nine MAX aircraft that were in process had their first flights in November and nine additional aircraft through mid-December. Were these aircraft produced to a lower standard than those after the formal restart with an improved quality system? Given the company’s lack of transparency, it is unlikely that we’ll ever know.
On December 12, Boeing announced an investment in South Carolina. Boeing is spending $1 billion in capital improvements to manufacturing facilities in South Carolina for the 787 Dreamliner program, which will enable a ramp-up to 10 aircraft per month by the end of 2026. Most analysts did not expect production to rebound to that level until 2028, which indicates that Boeing wants to build revenues as rapidly as possible to turn around its financial performance.
December 13th brought news that the new Air Force One program will be delayed. The delay now extends beyond the term of the President-elect, who had a tough conversation with Boeing’s CEO regarding the inability to deliver the program on-time and on-budget.
December 19th brought a major order for 100+100 737 MAX 10 aircraft from Pegasus Airlines, based in Turkey. This is a key win for Boeing, likely because deliveries could start in 2028, something Airbus could not match given the high demand for the A321neo and lack of capacity to grow production in the near term.
It also brought route cancellations for the summer season due to aircraft shortages and Boeing delivery shortfalls. IATA data show the average age of aircraft has grown to its highest level since measurements began.
On December 22nd, Leeham News revealed an analysis that Boeing will take a decade or more to reach “normal” profitability levels and that selling every airplane in the backlog will not clear the debt ratios back to 2018 levels.
Boeing also announced another executive council member’s departure, CIO Susan Doniz.
THE BOTTOM LINE
As this is written, over the Christmas holiday, only a handful of days remain in the worst year in Boeing’s history. For Boeing stakeholders, 2024 can’t end fast enough. Let’s hope 2025 brings a continued turnaround and results in positive progress with no significant incidents or accidents.
The past can come back to haunt a company, so let’s hope the multiple quality escapes at the company over the last few years don’t result in a tragedy. The industry needs a healthy Boeing, and the support for Kelly Ortberg turning around the company is universally positive. We hope 2025 will become the year for execution, coming off a year of multiple failures.
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A brilliant read full of detail and underlining how far Boeing has fallen and the long, long road to financial and, eventually, reputational recovery.
I think few want the company to fail but it is of immense regret that every single one of the key directors who put profit before quality has so far escaped punishment and are now spending time counting their ill gotten gains. The aviation world needed a different outcome with punitive financial penalties, if not jail time.