Can the 737-Max Bring Down Boeing?

We have covered the story of Boeing and the issues it has bene having since the two airplanes fell from the sky in 2018 and 2019. However, today there was news that there are now even more issues with the same plane that is supposed to being fixed for a new rollout, which begs the question of whether this scandal could really bring a company like Boeing down. Though it is almost unthinkable, there are many components to consider. In this post we shall examine why this case is different to most other scandals and why, potentially, it could be more impactful for Boeing than it thinks.

To begin with, it must be said that although it is facing turbulent times, Boeing remains one of the world’s largest companies. It is certainly not facing its downfall any time soon, but its situation is certainly not optimal. We last discussed the situation when we looked at the incredible number of aeroplanes that it has grounded since the demise of the Ethiopian Airlines plane in 2019; so much so that only in December of last year did Boeing completely halt production of the aircraft. However, it was announced today that a new flaw with the 737 Max’s software was discovered, in an area different than the original fault that was forcing the nose of the aircraft down to prevent the plane from stalling. The current issue is with the software that is responsible for checking whether the aircraft is receiving the right data for its purposes. Bloomberg reports that the issue is occurring when the aircraft starts up, with the Seattle Times suggesting that the issue may only be a slight one, and relatively easy to remedy. Nevertheless, Boeing’s share price continued to tumble on the news, sending it down by 2.3% and causing Fitch to downgrade the company (with all of the factors affecting Boeing taken into account). Boeing has continually stated that its main focus is on fixing the aircraft so that it meets with FAA regulations, with the company stating that ‘our highest priority is ensuring the 737 MAX is safe and meets all regulatory requirements before it returns to service’. Yet, analysts are still predicting a heavy hit for the company, with one analyst suggesting the hit could top more than $20 billion, and that is before the families of those affected by the tragedies have any lawsuits settled (and this is predicted upon a Summer return for the aircraft). However, leaving aside the issue of regulators hopefully taking a hard line with the company regarding the aircraft’s return to service – on account of a reaction to suggestions the relationship between the FAA and Boeing is already too close, or ‘incestuous’ as one outlet put forward – one wonders whether there may be bigger issues around the corner.

The issue for Boeing, and something that separates it from other corporate behemoths, is that its products are central to modern human existence. It is not a bank who may pilfer investors, and see very little consequence as a result. When its products fail, people usually perish. It is for this reason that its current position is an extremely precarious one. Imagine the scenario; the 737 MAX is returned to service and, within a week, another plane falls to the Earth. The fallout would be monumental for the company and it would, arguably, struggle to regain the confidence of the public. It is already understood that it will take a while for consumer confidence to come back, and how Boeing and its airline customers decide to phase the aircraft back into service will be important. However, there are a number of elements on Boeing’s side moving forward. It is still the dominant player in the marketplace, and its other products continue to dominate the sky. It competitor, Airbus, whilst close to moving ahead of Boeing in terms of current sales, likely does not have the capacity to take over the market where Boeing to face more struggles. Also, whilst the US would argue the EU are the more guilty party, it is still providing Boeing with state-backed subsidies and, in the current political climate, would surely not be allowed to fail. Boeing will be safe, but its return will be a long and probably painful one. If another plane were to fall, Boeing would be in trouble unlike it has seen before and it would be, there can be no doubt, in a real crisis.


Keywords – Boeing, airlines, consumer safety, @finregmatters

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