((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
(Added letter to FAA in paragraph 5 and context of Calhoun’s remarks in paragraph 17) by Tim Hepher, Rajesh Kumar Singh, David Shepardson and Valerie Insinna
Boeing BA.N is reeling from a week of turmoil that upended production and development schedules and tested confidence in Chief Executive Dave Calhoun, nearly a month after the explosion in theft of a dummy door on a 737 MAX 9, industry insiders said.
From Seattle, where the 737s are built, to Washington, where they are regulated, to Dublin, the center of the airline finance world, the company has faced a perfect storm of competing pressures.
In just eight days, Boeing was imposed an unprecedented cap on 737 production growth by regulators, bowed to pressure from lawmakers to drop a request for a temporary exemption from the rules. design for its next model and had to face a possible revolt () from one of its main clients.
The tumult is not over. U.S. investigators are expected to soon release a preliminary report into the January 5 Alaska Airlines ALK.N plane explosion after visiting the 737 factory last Friday.
The director of the Federal Aviation Administration (FAA) will be heard by the United States House of Representatives on Tuesday and Mr. Calhoun could be heard by lawmakers as early as March. The FAA will be asked whether it has found any “persistent” quality problems, according to a preparatory letter reported by Reuters at .
Industry experts said the period is shaping up to be a critical test of management’s ability to weather Boeing’s latest crisis amid efforts to be more open than lawyer-drafted responses to the MAX crashes that killed 346 people in 2018 and 2019.
“What they need to do now is reestablish credibility with the FAA and with customers, and obviously someone is going to have to pay the price,” said Adam Pilarski, senior vice president at Avitas and former chief economist at Douglas Aircraft, now part of Boeing.
“I don’t see how the CEO can survive and how he should survive,” the well-known industry veteran told Reuters.
A Boeing spokesperson said the company had no comment on industry speculation.
Some respite came with quarterly results Wednesday, when Boeing said 737 production reached a higher level than expected before being capped.
But a frosty exchange between Ron Epstein, an analyst at Bank of America, and Mr. Calhoun highlighted a sensitive question likely to dominate the hearings: Why it took until today, after a near disaster, to strengthening quality controls five years after crashes placed MAX factories under close scrutiny.
“I’m still trying to understand how we got here,” Mr. Epstein said on the conference call with analysts after the results were released. “Wasn’t the 737 production line the most monitored in the world?
Mr. Calhoun said he disagreed with that assertion and that quality data had improved, although such problems should never occur.
SCREENING “WILL MAKE US BETTER
After a decade on Boeing’s board, Mr. Calhoun took over as chief executive in 2020, promising to restore confidence after the MAX crisis.
But his longevity has raised questions about his ability to distance himself from the company’s past and carry out the changes needed for Boeing to regain its stature.
In a Jan. 31 letter to employees released by Boeing, Mr. Calhoun said that “increased oversight – whether from ourselves, our regulator or others – will make us better.”
Speculation about a shakeup intensified this week after the company withdrew a request for a safety exemption that could have speeded up the certification of its next plane, the 737 MAX 7.
Although the decision was made under pressure from lawmakers, it raises doubts about how Boeing handles its major customers, such as Southwest Airlines.
LUV.N, the MAX 7’s largest customer, and raises questions about the timing of a MAX 10 related model.
Boeing’s desire to certify the MAX 7 with a temporary waiver while it designs an improved anti-icing system came to fruition as industry powerhouses gathered in Dublin for their annual Airline Finance Summit .
When Dublin speaks, aircraft manufacturers take it into account. In 2012, Airbus AIR.PA dispatched a senior executive to allay lessor concerns about cracks in the A380’s wings.
This week, however, the public reaction has been muted. Chief executives of leasing companies backed Boeing’s management, and the head of budget airline Ryanair RYA.I defended Calhoun, offering to take MAX 10 orders abandoned by other airlines after Reuters reported that United Airlines UAL.O had approached rival Airbus.
“There’s no point pushing it because they couldn’t feel it more intensely than they do now,” Aviation Capital Group chief executive Thomas Baker told Reuters.
But outside the conference, the mood was more somber and there were many discussions about changes within Boeing or its business unit. The abrupt about-face on the MAX 7 surprised many, even though Mr. Calhoun had previously declared that the request would not be withdrawn. Airlines have been scrambling to understand what that would mean for the more widely sold MAX 10, which is under development.
Although the MAX 7’s new design focuses on potential debris from an engine crankcase in the event of anti-icing failure, delegates questioned whether this could indirectly affect other systems in a tougher regulatory climate.
“This could be a real Pandora’s box,” one MAX customer told Reuters.
Boeing told analysts it would not dwell on “what-ifs” about the larger MAX 10, and Chief Financial Officer Brian West said it would be certified when the FAA decides.
Some industry officials attributed the decision to reverse course to a failed attempt by Boeing to lobby to circumvent the regulations – including visits by Calhoun to several lawmakers – ahead of a Senate Commerce Committee hearing that did not has not yet been programmed.
Other industry representatives told Reuters after the Alaska incident that there was little, if any, chance the FAA would approve the exemption in the current climate.
Mr. Calhoun’s decision followed a 90-minute meeting last week with Senator Tammy Duckworth, who heads the Commerce Committee’s aviation safety subcommittee. He defended his visit to lawmakers, adding that he was convinced by “strong, principled arguments”
Ms. Duckworth told Reuters she appreciated Mr. Calhoun’s decision to withdraw the MAX 7 certification application.
“I thanked him for making what is probably a difficult decision for shareholders, but also the right decision for the people who will be traveling as passengers on the plane,” Ms Duckworth said.