Tuesday, November 26, 2019

737 MAX: The Case Against Boeing

The title of Alec McGillis' The Case Against Boeing is misleading. Samya Stumo, one of the victims of the second 737 MAX crash was the daughter of a niece of Ralph Nader:
They were the first American family to sue Boeing, accusing the company of gross negligence and recklessness.
McGillis certainly does discuss some of the ways the culture of Douglas led to Boeing's malfeasance, including blaming the pilots:
Boeing seemed to believe that pilot error had caused the crash. In its response to an initial Indonesian government report, it highlighted the contrasting reactions of the crew on the doomed flight and the crew the day before, saying that the pilots on the second day had not followed the standard “runaway trim” procedures.
But that's not really what the article is about. Follow me below the fold as I try to tease out the real story McGillis tells, and then add more news on the topic.

Nader understands that Boeing needs to be held responsible, because:
Taken together, the reports suggested that Boeing had put all the risk on the pilot, who would be expected to know what to do within seconds if a system he didn’t know existed set off a welter of cockpit alerts and forced the plane downward. “An airplane shouldn’t put itself in a position where the pilots have to act heroically to save the plane,” the veteran U.S. commercial-airline pilot told me. “Pilots shouldn’t have to be superhuman. Planes are built to be flown by normal people.” Gregory Travis, the pilot and software engineer, said, “MCAS sealed their fate. Everything that comes after that is noise.”
But Nader also understands that the major responsibility lies with Congress. Since the crash, Nader and his family:
have made more than a dozen trips to Washington—a routine they expect to continue: they recently found an apartment in town. They have met separately with two dozen members of Congress, and with the heads of the Federal Aviation Administration and the National Transportation Safety Board, and testified before a House committee. ... They got a meeting for themselves and eleven other victims’ families with Elaine Chao, the Secretary of Transportation.
McGillis writes:
The government used to provide a counterweight to corporations that compromised safety. Owing in great part to the activism of Nader and his allies, in the late sixties and early seventies agencies such as the National Highway Traffic Safety Administration, the Occupational Safety and Health Administration, and the Consumer Product Safety Commission were founded to protect citizens.
Especially with today's culture of short-termism, companies will tend to do whatever they can get away with to cut costs and shorten product cycles. It is up to government regulation to push back against this to protect the public from the risks it engenders, especially in areas where lives hang in the balance. But:
As early as 1971, however, there was a backlash. That year, Lewis Powell, prior to serving on the Supreme Court, wrote a memo calling on corporations to more aggressively fight regulations. He singled Nader out as a threat, “a legend in his own time and an idol of millions of Americans.”
...
By the early nineties, it was plain to Nader that the government was failing to regulate air safety. In “Collision Course,” a book that he co-wrote with Wesley J. Smith, they warned, “It is an unfortunate fact that government oversight and enforcement is so underfunded and understaffed that regulators and inspectors must rely upon the integrity and good faith of those they regulate to obey the rules.” They continued, “If a company is determined to cut corners, there is every likelihood that it will succeed, at least for a while.”
Douglas Boeing was determined to cut corners with the 737 MAX.

The person responsible for aviation safety at the FAA is Ali Bahrami. Here is a timeline of Ali Bahrami's career (italics are quotes from McGillis):
  • 1979 Bahrami becomes a senior engineer at Douglas Aircraft.
  • 1989 Bahrami becomes an engineer at FAA
  • 2004 Bahrami becomes manager of the FAA's Transport Airplane Directorate
  • 2003 Boeing lobbyists began pushing for a wholesale shift in regulatory oversight.
  • Change to ODA
    2005 embracing the deregulatory agenda promoted by the Bush Administration and the Republicans in Congress, the F.A.A. changed to a model called Organization Designation Authorization. Manufacturers would now select and supervise the safety monitors. If the monitors saw something amiss, they would raise the issue with their managers rather than with the F.A.A. I.e. manufacturers could hide safety problems from the FAA.
  • 2009 Bahrami becomes manager of the FAA's Boeing Aviation Safety Oversight Office, a forty-person bureau in Seattle dedicated to serving Boeing. I.e. the role of the "Safety Oversight Office" was to promote Boeing's interests.
  • 2011 Boeing announces the 737 MAX.
  • 2013 Bahrami becomes Vice President for Civil Aviation at Aerospace Industries Association, a Washington, D.C.-based trade association that represents the nation's leading aerospace and defense manufacturers and suppliers.  I.e. a lobbyist.
  • 2017 (March) FAA certifies the 737 MAX.
  • 2017 (July) Bahrami becomes FAA's Associate Administrator for Aviation Safety.
  • 2018 (October) Lion Air flight 610 crash.
  • 2019 (March) Ethiopian Airlines flight 302 crash.
  • 2019 (July) Ali Bahrami ... appeared at a Senate hearing. The Wall Street Journal had just reported that the F.A.A. had determined, after the Lion Air crash, that there was a high risk of another 737 MAX emergency within the next ten months, but had decided to allow Boeing to proceed with its software fix without grounding the planes. Bahrami said, “From the safety perspective, we felt strongly that what we did was adequate.”
  • 2019 (July)  Nader's family were called in to meet with Bahrami. As Tor related in a recording that he made immediately afterward, they asked Bahrami what he thought he could have done to prevent the Ethiopia crash. Bahrami said that there was nothing he could have done. (Bahrami does not recall saying this.)
So, while the FAA was certifying the 737 MAX, Bahrami was lobbying on behalf of Boeing (and smaller companies). It is hard to believe he was pushing for more rigor in the FAA's certification process. Before that, he was running an FAA bureau "dedicated to serve Boeing":
The F.A.A. has said that it lacked the resources to oversee the plane’s updates, but the veteran F.A.A. engineer in Seattle told me that this was because of the way its Boeing office was set up by Ali Bahrami, with only a few people assigned to flight controls.
One the 737 MAX was certified Bahrami cycled back through the revolving door to be in charge of aviation safety at the FAA. Obviously, given the deregulatory fervor of the current administration, a lobbyist for aircraft manufacturers would be the ideal candidate to oversee safety at the FAA. And why would anyone think that Bahrami would admit that there was anything he could have done but didn't after those incompetent Lion Air pilots crashed their plane?

But, as Nader wrote in 1993:
It is an unfortunate fact that government oversight and enforcement is so underfunded and understaffed that regulators and inspectors must rely upon the integrity and good faith of those they regulate to obey the rules.
And as he wrote this month in Buffeting Boeing CEO’s Rope-a-Dope in Congress:
Ever since the Congress, under Boeing pressure, ordered the FAA to delegate more self-certifying power to Boeing and other aircraft makers, hearings with the FAA, Boeing, and airlines have been theater. Nothing results except giving in to aircraft manufacturers and carriers’ demands, rubber-stamped by the toady FAA and an indentured Congress.
Lobbyists like Bahrami peddling deregulatory ideology can pour money into legislators coffers and there is little that conscientious bureaucrats can do to counter their influence. The real culprits in the deaths of 346 people are the legislators incapable of resisting lobbyist dollars. In addition to the deaths, there are massive financial losses at too-big-to-fail Boeing and its customers, which the taxpayer will undoubtedly be called upon to repair (see Boeing's blackmail of NASA for an example).

Yves Smith's FAA Pushes Back on Boeing Pressure to Recertify 737 Max by Year End; Agency Also Considering Major Revamp of Certification Process is a must-read. Smith starts by pointing out that, while Boeing may be desperate to get the 737 MAX flying again, the FAA is equally desperate to regain its credibility:
The reason to think the FAA’s recent noises might be precursors to real action, as opposed to more better optics, is that the 737 Max debacle has led the agency to lose its most valued asset: that of having its aircraft certifications be accepted without independent vetting by other aviation regulators. Losing that would put American manufacturers at a serious disadvantage relative to foreign competitors. The stakes are so high that the FAA’s incentives are to do whatever it takes to get back to status quo ante.
This is a problem on the desk of the new FAA Administrator:
And the FAA chief might be up to the task. The current FAA “Administrator” is Steve Dickson, who was sworn in on August 12, meaning he is the new guy who isn’t hamstrung by having to defend past decisions. He’s also been a pilot, first a fighter pilot and later flew commercial jets, including 737, and had retired from being the senior VP of flight operations for Delta, which included safety. Note that Delta did not buy the 737 Max. He’s also a law school graduate (which means not easily intimidated by suits).
Source
The "American manufacturer" that would suffer the most if the FAA's certification wasn't accepted overseas would be Boeing. Ignoring the long-term downside of rushing the FAA's recertification is typical of Boeing's short-term focus on the stock price. It  had poured $60B in cash on its stockholders ($17B dividends + $43B stock buybacks) since 2013 to pump it. As I wrote back in July:
Suppose instead of buying back stock, Boeing had invested in its future. Even assuming an entirely new replacement for the 737 series was as expensive as the 787 (the first of a new airframe technology), they could have delivered the first 737 replacement ($32B), and be almost 70% through developing another entirely new airframe ($11B/$16B). But executive bonuses and stock options mattered more than the future of the company's cash cow product. Instead:
Blowing these $43 billion on share buybacks has caused Boeing to have a “total equity” of a negative $5 billion. In other words, it has $5 billion more in liabilities than in assets. This company is out of wriggle room. If it can’t borrow enough money to make payroll, it’s over.
Short-termism is a cancer that is eating US corporations, but the guys who took the decisions will suffer no consequences for killing the company, they'll retire rich.
Remarkably, Boeing's stock has failed to slump since the 737 MAX crashes and the problems with NASA's Commercial Crew Program became public. Their desperation to keep it that way has led them to pump the stock in another way:
Boeing has continued to push the notion that the 737 Max would be certified to fly as of various dates that proved to be a crporate fantasy as new problems and concerns emerged. The latest was an announcement last Monday that it expected the 737 Max to get a green light in December, which goosed the stock.
In FAA pushes back on “pressure” to return Boeing 737 Max to service, Jon Ostrower writes:
Both the FAA and other stakeholders viewed the Boeing statement as overt public pressure to recertify the 737 Max by the end of 2019. President of Southwest Airlines Pilots Association on November 13 wrote that Boeing was “increasingly publicizing” that it may have to shut Max production as it is running out of room for aircraft storage.

“There is some concern that this is simply another tactic to push the RTS timeline up, force operators to resume making payments on MAX aircraft, and transfer some costs, logistics, and responsibilities of storing and restoring the MAX to revenue service to respective operators,” wrote Capt. Jon Weaks in a letter to the Southwest Airlines pilot corps.
Boeing's arm-twisting didn't sit well with Dickson, who seems to be a sophisticated political operator:
The FAA has apparently had enough of Boeing trying to pressure them via the media. Interestingly, Dickson responded not by publicly slapping down Boeing but by making a countermove that had the same effect, of circulating a memo and including his “I’ve got your back” message in what appears to be a regular weekly video to the entire agency that is posted on YouTube. By sending them to the entire agency rather than, say, a narrow group overseeing the 737 Max review, this message were guaranteed to get to the press pronto.
Dickson memo, courtesy The Air Current
But in addition to messaging the whole organization, Dickson took specific action:
Dickson also sent a memo to the head of the 737 Max team which appears to also have been circulated widely within the FAA, which was likely no accident.
And who is the "head of the 737 MAX team? Ali Bahrami! My guess is that Dickson wasn't merely pushing back on Boeing, he was also putting Bahrami on notice that his freedom of action was severely constrained because the boss was looking over his shoulder.

Other countries' regulators appear to be taking a harder line against Boeing, as evidenced by Natalie Kitroeff and David Gelles' Canadian Official Calls for Removal of Key Software From 737 Max:
A manager at Canada’s aviation regulator believes that Boeing should remove software that played a role in two deadly crashes of its 737 Max before the plane is cleared to fly again, according to emails between global aviation regulators this week that were reviewed by The New York Times.
...
“The only way I see moving forward at this point, is that MCAS has to go,” the official, Jim Marko, the manager in aircraft integration and safety assessment at Transport Canada Civil Aviation, wrote in the email. He sent the email on Tuesday to officials at the Federal Aviation Administration, the European Union Aviation Safety Agency and Brazil’s National Civil Aviation Agency.

41 comments:

David. said...

In O-rings and production pressure, Daniel Little reviews a 2009 book by a senior engineer at Morton Thiokol (MTI) descfibing the process by which, under pressure from NASA management, who were under pressure from Congress, MTI management over-rode their engineers and approved the fatal launch of the Challenger space shuttle.

David. said...

More evidence of inadequate regulatory oversight in Boeing 737 Max Was Plagued With Production Problems, Whistle-Blower Says by David Gelles:

"Four months before the first deadly crash of Boeing’s 737 Max, a senior manager approached an executive at the company with concerns that the plane was riddled with production problems and potentially unsafe. That manager, Ed Pierson, plans to tell his story to Congress on Wednesday.

Employees at the Renton, Wash., factory where the Max is produced were overworked, exhausted and making mistakes, Mr. Pierson said in an interview. A cascade of damaged parts, missing tools and incomplete instructions was preventing planes from being built on time. Executives were pressuring workers to complete planes despite staff shortages and a chaotic factory floor.
...
During the time when Mr. Pierson said the Renton facility was in disarray, it built the two planes that crashed and killed a total of 346 people."

David. said...

In FAA let Boeing 737 Max continue to fly even as review found serious crash risk Dominic Rushe show how completely FAA management placed Boeing's interests above those of the passengers and crew:

"US regulators allowed Boeing’s 737 Max to keep flying even after their own analysis found the plane could have averaged one fatal crash about every two or three years without intervention.

According to a report dated a month after a Lion Air 737 Max crashed in October 2018, killing 189 people, the Federal Aviation Administration (FAA) concluded the plane could become involved in more fatal crashes without design changes."

They assessed a crash every 2-3 years but didn't ground the plane. What more needs to be said. This came out in a House hearing, the very institution that had voted to starve the FAA of resources and transfer responsibility from the FAA to Boeing.

David. said...

Two headlines today show Boeing's chickens coming home to roost. Shutdown likely at Boeing Renton as 737 MAX crisis extends and Australia’s Qantas chooses Airbus over Boeing for longest routes.

David. said...

Yves Smith discusses the implications of Boeing's roosting chickens:

"Boeing now has more 737 Max aircraft in its inventory that it sold before the troubled jet was grounded worldwide. The Seattle Times points out that many of Boeing’s 400 mothballed planes will need “extensive maintenance” to be able to fly. The Wall Street Journal cited analyst estimates that the freeze would cut Boeing’s $4.4 billion a quarter 737 Max cash burn by about 50%."

And:

"The knock-on impact of the production freeze will be significant. From the Journal:

“It would be hard to have any other single company stop the production of a single product and have it hit the economy as hard as this would,” said Luke Tilley, chief economist at investment-management firm Wilmington Trust. He estimated that stopping MAX production for one quarter would shave 0.3 of a percentage point from quarterly annualized GDP growth.

Boeing’s suppliers will take a blow,. With the propensity of major firms to concentrate production among fewer suppliers (to gain more pricing leverage, natch), the damage to some could be large. And they also be less likely to shield their workers even in the near term. "

David. said...

Mentour Pilot's explanation of the knock-on effects of Boeing halting 737 MAX production on his YouTube channel is worth watching.

David. said...

See also matt Stoller's The Coming Boeing Bailout?:

"In 1993, Clinton’s Deputy Secretary of Defense, Bill Perry, called defense contractor CEOs to a dinner, nicknamed “the last supper.” He told them to merge with each other so as, in the classic excuse used by monopolists, to find efficiencies in their businesses. The rationale was that post-Cold War era military spending reductions demanded a leaner defense base. In reality, Perry had been a long-time mergers and acquisitions investment banker working with industry ally Norm Augustine, the eventual CEO of Lockheed Martin.

Perry was so aggressive about encouraging mergers that he put together an accounting scheme to have the Pentagon itself pay merger costs, which resulted in a bevy of consolidation among contractors and subcontractors. In 1997, Boeing, with both a commercial and military division, ended up buying McDonnell Douglas, a major aerospace company and competitor. With this purchase, the airline market radically consolidated."

Boeing is Too Big To Fail in both commercial and military products, so given:

"Blowing these $43 billion on share buybacks has caused Boeing to have a “total equity” of a negative $5 billion. In other words, it has $5 billion more in liabilities than in assets. This company is out of wriggle room. If it can’t borrow enough money to make payroll, it’s over."

A taxpayer bailout seems inevitable.

David. said...

Like Wolf Richter, Matt Stoller is focused on Boeing's finances:

"Boeing has significant development costs associated with the 737 Max, which is inherently the case for all large complex aircraft systems. The problem is that accounting for these costs have been pushed into the future based on anticipated sales, which is risky but manageable IF you can build safe aircraft airliners want to buy. But unfortunately for Boeing and anyone who wants a good aerospace industry, that was a big if. And now that the risk has turned into catastrophe, the accounting probably doesn’t make sense."

Rating agencies are downgrading Boeing's debt, and the company has a large negative cash flow:

"All the focus on the MAX meant other items flew under the radar—items like Boeing’s cash flow data.

“Operating cash flow for the third quarter was negative $2.4 billion driven by lower 737 deliveries, lower advance payments and timing of receipts and expenditures,” said Boeing (ticker: BA) CFO Greg Smith on the company’s earnings conference call. He added cash pressures will remain until MAX deliveries begin again."

David. said...

Boeing’s Crisis Deepens as the C.E.O. Struggles to Confront It by Natalie Kitroeff and David Gelles goes into detail about the deteriorating relationship between Boeing's CEO and his regulator:

"After the crashes, but before the plane was grounded, Mr. Muilenburg called President Trump and expressed confidence in the safety of the Max. He has repeatedly made overly optimistic projections about how quickly the plane would return to service, pushing for speedy approval from regulators. The constantly shifting timeline has created chaos for airlines, which have had to cancel thousands of flights and sacrifice billions of dollars in sales.

In his few public appearances, Mr. Muilenburg’s attempts to offer a sincere apology for the accidents have been clumsy, prolonging Boeing’s reputational pain. His performance has left lawmakers irate. The families of crash victims, convinced the company does not care about their loss, have repeatedly confronted him with posters of the dead."

And Boeing’s Push to Make Training Profitable May Have Left 737 Max Pilots Unprepared by Peter Robison and Julie Johnsson illustrates yet another instance of management prioritizing profit over safety:

"But the most fundamental breakdown at Boeing may have been a lack of appreciation of how humans respond under stress—both in the machine it was designing and in its own organization. On aircraft like the Boeing 777, a cadre of pilots had worked closely with engineers to solve problems. By the time the Max entered development, Boeing was pushing hard to turn the unglamorous but all-important business of customer training into a profit center of its own. Many pilots were distracted by a dispute with Boeing over the hiring of outside contractors. They contended the quality of training was slipping."

David. said...

It’s Not Just Software. New Safety Risks Under Scrutiny on Boeing’s 737 Max by Natalie Kitroeff and David Gelles lists a number of additional safety problems with the 737 MAX turned up by Boeing's and the FAA's reviews:

"The company is looking at whether two bundles of critical wiring are too close together and could cause a short circuit. A short in that area could lead to a crash if pilots did not respond correctly, the people said."

And:

"CFM International, the joint venture between General Electric and Safran that manufactures the engines, has told the F.A.A. it discovered a possible weakness in one of the engines’ rotors, which could cause the part to shatter. The likelihood of that failure is remote and regulators aren’t requiring an immediate fix, though they are looking to require that airlines inspect as many Max engines as possible before the plane returns to service, an F.A.A. official said."

And:

"While assembling the Max, workers at Boeing’s Renton, Wash., factory had ground down the outer shell of a panel that sits atop the engine housing in an effort to ensure a better fit into the plane. In doing so, they inadvertently removed the coating that insulates the panel from a lightning strike, taking away a crucial protection for the fuel tank and fuel lines. The F.A.A. is developing a directive that will require the company to restore lightning protection to the engine panel and Boeing is already in the process of resolving the issue."

David. said...

Reuters reports that Boeing has bowed to the inevitable:

"Boeing said Tuesday it is recommending that pilots receive training in a flight simulator before the grounded 737 Max returns to flying, a reversal of the company’s long-held position that computer-based training alone was adequate.
...
Boeing’s interim chief executive, Greg Smith, said in a statement that Boeing decided to recommend simulator training because of the importance to Boeing of gaining public and airline confidence in the Max."

Presumably they will owe Southwest $1M/plane.

David. said...

Boeing Employees Mocked F.A.A. and ‘Clowns’ Who Designed 737 Max by Natalie Kitroeff provides yet more evidence of Boeing's dysfunctional culture:

"Boeing employees mocked federal rules, talked about deceiving regulators and joked about potential flaws in the 737 Max as it was being developed, according to over a hundred pages of internal messages delivered Thursday to congressional investigators.
...
The most damaging messages included conversations among Boeing pilots and other employees about software issues and other problems with flight simulators for the Max, a plane later involved in two accidents, in late 2018 and early 2019, that killed 346 people and threw the company into chaos."

David. said...

Dominic Rushe writes Ousted Boeing CEO Dennis Muilenburg to receive $60m in stock and pension:

"Muilenberg, 56, will forfeit stock worth $14.6m, according to Boeing, but is contractually entitled to receive $62.2m in stock and pension awards.

“We thank Dennis for his nearly 35 years of service to the Boeing Company,” the company said in a statement. “Upon his departure, Dennis received the benefits to which he was contractually entitled and he did not receive any severance pay or a 2019 annual bonus.”"

Poor guy! Loosing 20% of his moolah!

David. said...

Boeing faces another million-dollar FAA fine over faulty 737 Max parts by Claudia Assis reports:

"Federal regulators said late Friday they could slap a $5.4 million fine on Boeing Co. ... for allegedly installing "nonconforming" wing parts on some 737 Max jets and later presenting the planes as ready for certification. The civil penalty would be in addition to a fine of $3.9 million proposed against Boeing in December for allegedly installing the same components on 133 of the company's 737 Next Generation jets, the Federal Aviation Administration said."

David. said...

My reaction to this New York Times story is that this, right here, is why US industry is dying:

"On Friday, Boeing said Mr. Calhoun would receive a $7 million bonus if he got the Max safely flying again. (Mr. Muilenburg is leaving with $62.2 million in stock and pension awards.)"

The board fired the guy who almost killed the company and made him rich.

The board hired a guy whose job is to rescue the dying company and they think he needs a BONUS of around 100 times a good salary just to motivate him to do the job he was hired to do?

David. said...

Edward Helmore's Boeing reports lowest order numbers in 30 years following 737 Max catastrophes gives some idea of how much trouble Boeing is in:

"The aerospace company reported on Tuesday that it had 87 more cancellations than new purchases in 2019. The figures included the cancellation of three 787 Dreamliners in December. In the same month, Boeing failed to book any 737 Max orders as customers avoided the model after two fatal crashes that have led to a worldwide grounding.

Boeing delivered 380 commercial airplanes in 2019, the lowest level since 2007, and fewer than half the 786 planes its main rival Airbus delivered last year, a record for the European jet maker.

Boeing’s numbers are especially bleak compared with Airbus’s 768 orders for new planes for 2019. The European plane maker currently has a 10-year production backlog on orders, or 7,482 commercial planes, while Boeing finished the year with a backlog of 5,406."

David. said...

Scott Hamilton's Boeing hasn’t hit bottom yet. Neither have suppliers is full of bad news for Boeing. Quarterly results are due in 2 weeks and Calhoun needs to get all the bad news out in one go. But there is so much he may not want to risk it:

"While Boeing hasn’t officially given any direction to the supply chain, information obtained by LNA indicates production will be suspended at least through February. Boeing hopes for a mid-February restart.

FAA recertification appears unlikely next month. Whether it comes in March remains a question.
...
Based on available information, the initial production rate will be between 10-15 MAXes per month. The return to rate 42 likely won’t occur until 2021. Achieving rate 57/mo, which was the goal by the end of 2019, now likely won’t occur until late 2022 at the earliest.
...
Boeing put on hold the development of a new airplane, whether it’s the New Midmarket Airplane (NMA) or Future Small Airplane (FSA)."

David. said...

The Seattle Times headline says it all - Beyond pilot trash talk, 737 MAX documents reveal how intensely Boeing focused on cost:

"soon after the MAX was certified in 2018, when a series of internal emails addressed why the MAX simulator program had proved so troublesome and expensive, the employees in the conversation pointed to a "culture" that prioritized cost-cutting over everything else."

David. said...

The case against both Boeing and the FAA just got a whole lot stronger. How Boeing’s Responsibility in a Deadly Crash ‘Got Buried’ by Chris Hamby recounts how pressure from Boeing and the FAA on the inquiry into the crash of a Turkish 737 NG at Schiphol a decade ago obscured a very similar cause to the 737 MAX crashes. Namely a flight control computer that relied on a single sensor that was not described in the documentation:

"The 737 NG has two parallel sets of computers and sensors, one on the left side of the plane and one on the right. Most of the time, only one set is in control.

On the Turkish Airlines flight, the system on the right was in control. The pilots recognized the inaccurate altitude readings and noted that they were coming from the sensor on the left. This would have led them to conclude that the bad data coming from the left didn’t matter because the autothrottle was getting the correct data from the right, Dr. Dekker found.

What the pilots couldn’t have known was that the computer controlling the engine thrust always relied on the left sensor, even when the controls on the right were flying the plane. That critical information was nowhere to be found in the Boeing pilots’ manual"

Worse, Boeing had a fix in 2006 but it was optional:

"Five years before the Turkish Airlines crash, Boeing was aware that a sensor malfunction could idle the engines improperly, but the company decided it wasn’t a safety concern, the Dutch investigators wrote. After receiving reports about autothrottle misfires that did not lead to accidents, a Boeing review board determined that if a malfunction occurred, pilots would recognize it and intervene.

In the meantime, Boeing developed a software update that allowed the autothrottle to compare the readings from the two altitude sensors. If they differed by more than 20 feet, the autothrottle wouldn’t be able to improperly idle the engines.

The safeguard was available in 2006, but the change wouldn’t work on some 737 NG models, like the Turkish Airlines plane, that used an autothrottle computer made by a different company. After the 2009 crash, Boeing developed a version of the update compatible with those computers, and the F.A.A. required airlines to install it."

David. said...

Boeing's debt load is ballooning, according to Jon Brodkin's Boeing seeks $10 billion in loans as 737 Max crisis continues:

"Boeing is aiming to borrow $10 billion or more to help it get through the 737 Max crisis, CNBC reported today, citing people familiar with the matter.

"The company has secured at least $6 billion from banks so far, the people said, and is talking to other lenders for more contributions," CNBC wrote. Citigroup, Bank of America, Wells Fargo, and JPMorgan already agreed to loan Boeing money."

Not including this $10B, the long-term debt load has increased rapidly:

"Boeing had $20.3 billion in long-term debt as of September 30, 2019, nearly double the $10.7 billion of long-term debt it had on December 31, 2018, according to a Boeing SEC filing. By contrast, Boeing added less than $1 billion in long-term debt in all of 2017.
...
Boeing in October reported Q3 2019 revenue of $20 billion, down from $25.1 billion year-over-year. Revenue for the first nine months of 2019 was $58.6 billion, down 19 percent year-over-year. Net earnings in Q3 2019 were $1.2 billion, down from $2.4 billion in Q3 2018."

David. said...

Wolf Richter pointed to Boeing's debt:

"The second thing to know about Boeing’s mad scramble to borrow another $10 billion is that it already has a huge amount of debt and other liabilities, and that its total liabilities ($136 billion) exceed its total assets ($132 billion) by about $4 billion as of September 2019, meaning that it has negative net equity, that the share buybacks have destroyed its equity, which is what share buybacks do to the balance sheet.

It also means that every dime in “cash” and “cash equivalent” listed on the balance sheet is borrowed. And this is about to get a whole lot worse. In October 2019, Boeing had already obtained a new credit line of $9.5 billion, which about doubled the size of its existing credit line. Credit lines serve as liquidity backup."

That was before Boeing's latest attempt to strong-arm the FAA into re-certifying the 737 MAX, as explained in Sean Gallagher's 737 Max fix slips to summer—and that’s just one of Boeing’s problems:

"Boeing executives are now telling the company's 737 Max customers that the software fix required to make the airliner airworthy will not be approved in the near future and that it will likely be June or July before the Federal Aviation Administration certifies the aircraft for flight again—meaning that the aircraft will have been grounded for at least 16 months."

The other problems are in Boeing's space business (the various Starliner failures, and the struggling Space Launch System) and its military business (the KC-46 tanker fiasco, the winddown of the F-18/A, and their subcontracting to Sikorsky for new helicopters). Read Gallagher's piece for the details.

David. said...

As expected, Calhoun tried to get the bad news on the table. David Gelles' Boeing Expects 737 Max Costs Will Surpass $18 Billion:

"Boeing on Wednesday said that the costs associated with shutting down and restarting the factory would amount to some $4 billion. ...

The company also said that the cost of compensating airlines that have suffered lost sales as a result of the grounding of the Max was now expected to reach $8.3 billion, up from a previous estimate of $5.6 billion. ...

And Boeing said that as a result of the grounding, ... it expected the overall cost to produce the 737 Max to rise to $6.3 billion in the years ahead, up from an earlier estimate of $3.6 billion."

To put that into perspective, $18.6B is 16% more than Boeing spent to develop the 787, an airframe using entirely new technology. So the decay of their corporate culture has cost Boeing more that it would have spent to develop a replacement for the 737 series, something they still urgently need to do!

And I'm skeptical that this announcement accounts for (a) the possibility of a delay in certification beyond mid-year, and (b) the effect of Boeing's use of "program accounting" to, in effect, book expected future profits now.

David. said...

Yves Smith writes:

"CEO thinking isn’t driven by economics as practiced by either neoclassical or finance economists. It is unduly influenced by net present value analysis, which is at the core of most companies’ capital budgeting processes as well as Wall Street financial modeling. Companies and often the Street assign unduly high risk premia, which results in cash flows more than five or ten years out having close to nada impact on cash flow analyses.

It isn’t just the rise of neoliberalism and the promotion of the ideology of shareholder capitalism that led to the fetishization of cash flow models (which are just storytelling that too many take too seriously because spreadsheets). It is also that the rise of the personal computer suddenly made it vastly easier to prepare financial forecasts, greatly increasing their use as a managerial tool. And I’ve seen again and again how users come to treat those models as more real than the conditions they represent."

David. said...

There's also a case against Airbus, and it has just been decided. David Pegg and Rob Evans' Airbus to pay record £3bn in fines for 'endemic' corruption reports that:

"Airbus, Europe’s largest aerospace multinational, is to pay a record £3bn in penalties after admitting it had paid huge bribes on an “endemic” basis to land contracts in 20 countries.
...
Allison Clare, for the SFO, told the court the company had paid bribes in Malaysia, Sri Lanka, Indonesia, Taiwan and Ghana between 2011 and 2015.

Airbus, which admitted five counts of failing to prevent bribery, had used a network of secret agents to pay large-scale backhanders to officials in foreign countries to land high-value contracts.
...
French prosecutors examined bribes to other countries including China, Japan, Russia, Kuwait, Brazil and Turkey."

But at least they didn't kill anyone.

David. said...

The subhead of Michael Sainato's ‘The only ones not paying for Boeing’s mistakes is Boeing': laid-off supply workers voice their anger:

"Thousands of US workers have suffered job cuts and loss of hours – while Boeing’s former boss walks away with $62m"

Not to mention loss of health insurance.

David. said...

On his YouTube channel, Mentour Pilot has an excellent 20-minute overview of the decay of Boeing's culture and Congress' destruction of the FAA's oversight capability.

David. said...

In Boeing Fixing New Software Bug on Max; Key Test Flight Nears, Alan Levin, Siddharth Vikram Philip and Christopher Jasper report that:

"Boeing Co. has discovered a new software problem on the grounded 737 Max, but the company said the flaw won’t set back the goal of returning the plane to service in mid-2020.

The planemaker identified the issue during flight testing and notified the Federal Aviation Administration last month, according to an email Thursday from Boeing. The problem was that an indicator light, designed to warn of a malfunction by a system that helps raise and lower the plane’s nose, was turning on when it wasn’t supposed to, the company said."

David. said...

Eric M. Johnson's Boeing's fraying 737 MAX suppliers see capacity crunch reports that:

"Boeing Co suppliers are shedding jobs and capacity to cope with a halt in 737 MAX output, but while that staves off chaos, aerospace executives worry the industry might be unable to ramp factories quickly enough when the plane wins approval to fly again.

As a result, industrial heavyweights like fuselage maker Spirit Aerosystems have already laid off workers. Spirit on Friday slashed its quarterly dividend and said it would receive $225 million from Boeing before April to support production.

Now a cluster of other crucial companies small and big that forge metal, assemble and paint 737 MAX winglets, and build data systems have followed suit with no indication that Boeing will offer a lifeline, people familiar with the matter said."

See also Consultant to Boeing: cut dividends, invest in new airplane by Scott Hamilton and Joey Roulette's Boeing's botched Starliner test flirted with 'catastrophic' failure: NASA panel.

David. said...

In Boeing’s Starliner problems may be worse than we thought, Eric Berger reports that:

"At this point, it seems that NASA and Boeing do not yet know what they don't know about the problems, and it will take some time to sort all of this out."

Al three of Boeing's major lines of business, commercial, military and space, have major problems related to poor-quality engineering.

David. said...

The headline of Lewis Tamb’s Seattle Times article says it all - Experts question whether Boeing’s board of directors is capable of righting the company. He details the board’s lack of engineering expertise, poor corporate governance, and culpability for the decisions that crippled the company.

David. said...

In Boeing Refuses to Cooperate With New Inquiry Into Deadly Crash Chris Hamby and Claire Moses report that:

"Boeing and American safety officials refused to cooperate on Thursday with a new inquiry by Dutch lawmakers into a deadly crash near Amsterdam in 2009 that had striking parallels with two more recent accidents involving the manufacturer’s 737 Max.

Members of the Dutch parliament wanted to question the Boeing chief executive, David Calhoun, about the company’s possible influence over the original Dutch investigation of the accident, which killed nine people on a Turkish Airlines flight. The National Transportation Safety Board also refused lawmakers’ request to participate."

David. said...

The key points of Phil LeBeau's Boeing posts zero new airplane orders in January are:

"* January is the latest month without orders following the grounding of the 737 Max in March of 2019.

* The company delivered 13 new airplanes in January, including six 787 Dreamliners, a pair of 777s, two 767s and three 737NGs.

* Boeing recorded a negative order rate in 2019 — for the first time in decades — as customers canceled or converted orders.
...
The lack of orders last month stands in contrast to its competitor Airbus, which logged orders for 274 commercial airplanes in January."

David. said...

More on the capture of the FAA in Niraj Choski's F.A.A. Failed to Assure Southwest Airlines Safety, Report Says (my emphasis):

"Among the report’s conclusions was that the agency failed to adequately certify that 88 Southwest planes bought from foreign carriers were up to federal standards.

Federal regulations allow carriers to use American-made planes acquired from foreign airlines, but only after the agency confirms their airworthiness. That process typically takes three to four weeks, but F.A.A. designees provided such certification for 71 of the 88 planes in just one day, the report found."

The report:

"cited accusations from F.A.A. officials that Southwest used “diversion, distraction and power” to get what it wanted and would regularly bypass local officials by going straight to F.A.A. headquarters."

David. said...

Gregory Tavis, who wrote How the Boeing 737 Max Disaster looks to a Software Developer, is back with Ship the Airplane: The Cultural, Organizational and Technical Reasons Why Boeing Cannot Recover. It is a truly excellent, must-read overview of how Boeing ended up with a single point of failure in a safety-critical system.

David. said...

In Starliner Gives Boeing A Hard Lesson In How Not To Verify Software Irene Klotz points out that the recent Starliner failures relate to the same problem that caused the 737 MAX disasters, poor software engineering:

"The independent review team assessing the Starliner’s Orbital Flight Test (OFT) is not expected to complete its work until the end of February, but NASA and Boeing said on Feb. 7 that the panel had found multiple areas where the software verification process failed."

David. said...

In Boeing finds debris in 737 MAX jetliners: company memo, Eric M. Johnson reports that:

"Boeing Co found debris that could pose potential safety risks in the fuel tanks of several 737 MAX aircraft that are in storage and waiting to be delivered to airlines, according to an internal memo seen by Reuters on Tuesday.

Foreign object debris, an industrial term for rags, tools, metal shavings and other materials left behind by workers during the production process, has been a quality control issue for various Boeing aircraft, such as its KC-46 tankers."

This has been an on-going problem. For example, Natalie Kitroeff and David Gelles reported 10 months ago on the same issue with the 787:

"Safety lapses at the North Charleston plant have drawn the scrutiny of airlines and regulators. Qatar Airways stopped accepting planes from the factory after manufacturing mishaps damaged jets and delayed deliveries. Workers have filed nearly a dozen whistle-blower claims and safety complaints with federal regulators, describing issues like defective manufacturing, debris left on planes and pressure to not report violations. Others have sued Boeing, saying they were retaliated against for flagging manufacturing mistakes.

Joseph Clayton, a technician at the North Charleston plant, one of two facilities where the Dreamliner is built, said he routinely found debris dangerously close to wiring beneath cockpits."

David. said...

Natalie Kitroeff and Michael S. Schmidt's Federal Prosecutors Investigating Whether Boeing Pilot Lied to F.A.A. starts:

"Federal prosecutors investigating Boeing are examining whether the company knowingly misled the Federal Aviation Administration while it was seeking the regulator’s approval for its 737 Max plane, according to two people familiar with the matter who spoke on the condition of anonymity to discuss an active inquiry.

In recent months, prosecutors have questioned several Boeing employees in front of a federal grand jury, with some of their queries focusing on whether Mark Forkner, a top pilot at the company, intentionally lied to the regulator about the nature of new flight control software on the jet, the people said."

David. said...

Dominic Rushe's Boeing's 'culture of concealment' led to fatal 737 Max crashes, report finds is based on a preliminary version of the findings of the House Transportation Committee. They are devastating for both Boeing and the FAA:

"In a blistering 13-page report the committee found Boeing’s Max design “was marred by technical design failures, lack of transparency with both regulators and customers”.

According to the report, in 2011 the manufacturer was “under tremendous financial pressure” to compete with its rival Airbus’s A320neo aircraft.
...
As a result of those pressures, and in order to get the Max certified as quickly as possible, the manufacturer misled and withheld information from the Federal Aviation Administration (FAA) and even “the very existence” of the MCAS anti-stall software system, blamed for the crashes, from pilots.
...
The regulator’s oversight was “grossly insufficient” and it “failed in its duty” to both uncover critical problems and make sure Boeing fixed them, the committee found. “The combination of these problems doomed the Lion Air and Ethiopian Airlines flights,” the report concluded."

Of course. the report doesn't blame the Congress for its failings in the case.

David. said...

Kenneth Chang's ‘Close Call’: NASA-Boeing Investigation of Starliner Flight Finds Lapses shows that Boeing's cultural problems aren't just with the 737 MAX:

"An uncrewed test flight of Starliner, a Boeing spacecraft designed to carry NASA astronauts, could have ended in disaster in December because of lapses that allowed software errors to slip through undetected and unfixed before the spacecraft launched, according to a review by NASA and Boeing that was announced on Friday.

The review team made 61 recommendations for fixes and improvements. Some recommendations were specific, such as changes to the software testing procedures. Others addressed possible blind spots in how the program was managed."

David. said...

Yesterday's Boeing news.

Boeing Crashes: $43 Billion in Share Buybacks Turn into Existential Threat by Wolf Richter reports that:

"Boeing’s shares came unglued, plunging 18.1% today, after having already plunged over the past four weeks. Since February 12, shares have crashed 46%, and since the peak on March 1, 2019, 57%. Today’s plunge came after a flurry of disclosures and leaks in the morning about Boeing, including:
* Sources said that Boeing is planning to draw down entirely and much quicker than expected its new credit facility of $13.825 billion as early as Friday, apparently worried that banks might freeze the credit facility later, and banks did during the Financial Crisis.
* Boeing disclosed that it had negative net orders of -28 aircraft for the first two months of 2020, with cancellations of the 737 MAX exceeding orders for all models"

Today's Boeing news.

Boeing Said to Add Another Fix to 737 Max to Appease Regulators by Niraj Chokshi reveals that:

"Before the scheduled return of the 737 Max this summer, the aircraft manufacturer plans to separate wire bundles in the jet to assure regulators about the plane’s safety, according to a source familiar with the company’s plans who was not authorized to speak publicly about them.

The wire bundles have raised concerns because they could, in rare circumstances, cause a short circuit and possibly lead to a catastrophic failure. Boeing has argued privately to regulators that the likelihood of such a failure is remote."

Boeing is down another 18% on the day.

David. said...

David Calhoun's Boeing criticism misses its most deserving target shows the Seattle Times editorial board has no confidence in Boeing's new CEO (and long-time board member).