Less than four weeks after a hole opened in a Boeing 737 Max 9 plane during a flight, company executives face a thorny question: Should they emphasize safety or financial performance?
Trouble looms as Boeing prepares to report its fourth-quarter earnings on Wednesday amid its biggest safety crisis in years. With the Jan. 5 incident on a Max 9 flight still under investigation, executives are grappling with how much to discuss quality control while assuring shareholders that the company is protecting their investment, according to two people with knowledge of the matter. .
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 destroyed the Max 9 and will almost certainly increase scrutiny of Boeing from lawmakers, airlines and safety groups.
Dave Calhoun, Boeing's chief executive, is expected to talk about safety during the company's call with investors Wednesday morning after the release of its earnings report, one of the people said. But it's unclear 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 meaning after news, including a report in The New York Times, that Boeing workers opened and then reinstalled the panel, known as a door stopper. The plug came loose from the Alaska plane shortly after takeoff. That revelation suggests that the incident, which terrified passengers and forced pilots to make an emergency landing, may have been caused by malfunctions at a Boeing factory in Renton, Washington.
Some aviation experts and executives have long said that Boeing's safety problems and its financial performance are intertwined. The company, these people say, for many years has put too much emphasis on increasing profits and enriching shareholders with dividends and stock buybacks, and not enough on investing in engineering and safety.
Boeing's emphasis on rewarding investors has led to quality and safety problems, its critics say, including two deadly crashes on the 737 Max 8 plane in 2018 and 2019 that killed nearly 350 people. Those accidents and the effects of the coronavirus pandemic, in turn, have hurt Boeing financially and allowed its main rival, Airbus, to surpass it in sales.
“Boeing has been appointing CEOs lately who seem more focused on stock price and dividends than on flight safety and production quality,” said Dennis Tajer, an American Airlines captain and spokesman for the union representing Boeing. the airline pilots.
Boeing declined to comment.
How Boeing handles its latest crisis in the coming weeks and months could have broad implications for its credibility with regulators, airlines and travelers, as well as its long-term financial performance.
Investors are concerned that this latest crisis could delay Calhoun's plans to put Boeing on more solid financial footing. The company's share price has fallen about 19 percent since January 5.
Airline executives, federal regulators and safety groups have expressed growing frustration with Boeing and its repeated safety problems.
Calhoun, who took over as CEO in January 2020 after serving on the company's board of directors for years, vowed then that the company would “become better” and held “accountable for meeting the highest safety standards.” and quality.”
Robert Isom, chief executive of American Airlines, told Wall Street analysts last week that “Boeing needs to get its act together.” He added: “The problems they have been facing over the last period of time, but also for several years now, are unacceptable.”
Adding to the sense of urgency for Boeing, the Federal Aviation Administration said last week it was limiting Boeing's ability to increase production of all 737 Max planes, including approving additional assembly lines, until the company demonstrates which has resolved its quality control problems. .
The agency has allowed Max 9 planes that it had grounded after the Alaska incident to resume flying after inspections. United Airlines and Alaska, the only two U.S. airlines flying the Max 9, have returned to using the planes in recent days.
Federal investigators are focusing in part on whether the two pairs of bolts that were supposed to hold the door plug were installed in the plane's body. No screws have been recovered.
The circumstances of the Alaska Airlines incident are different from those of the Max 8 accidents: No serious injuries were reported, and the problem appears to be related to manufacturing rather than design. But Boeing's approach in its April 2019 quarterly earnings report, just weeks after the second Max crash, may serve as a template for Boeing executives on Wednesday.
During that earnings call, Dennis Muilenburg, then the company's CEO, spent several minutes talking about safety and quality, rather than Boeing's financial performance.
“Recent events have been a profound reminder of the importance of our long-standing values at Boeing: safety, quality and integrity, even more so in the difficult times we now face,” Muilenburg said at the start of the call. “Our work demands the utmost excellence.”
Analysts expect Boeing to try to reassure stakeholders about its commitment to safety.
“In our view, investors are a secondary audience for Wednesday's call, as regulators, members of Congress and their staff, and the press and public are key groups that Boeing should address, and are likely to “The focus is on processes to ensure safety and quality,” JP Morgan analysts wrote in a note on Monday.
Calhoun has suggested that he is not focusing on Boeing's financial performance at this time.
“This is not the time to talk about what I can or can't do regarding 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 right now is solely focused on understanding and solving the security problem.”
Peter Eavis contributed reports.
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