A U.S. Air Force KC-46A Pegasus jet takes off on April 23 near a line of Boeing 777X airplanes parked nose to tail on an unused runway at Paine Field, near Boeing’s production facility in Everett. (AP Photo/Elaine Thompson, File)

A U.S. Air Force KC-46A Pegasus jet takes off on April 23 near a line of Boeing 777X airplanes parked nose to tail on an unused runway at Paine Field, near Boeing’s production facility in Everett. (AP Photo/Elaine Thompson, File)

Hoping for recovery, Boeing bosses look to the future

Top Boeing leaders said the company will launch a freighter version of the giant 777X, built in Everett.

By Dominic Gates / The Seattle Times

After almost three years of crisis, with Boeing still facing immense challenges, two top Boeing leaders in exclusive interviews laid out their strategy: hunker down, fix the litany of current problems and rely on a revamp of the company’s engineering culture to restore Boeing’s stained reputation.

Commercial Airplanes CEO Stan Deal said Boeing, for all its current problems, is in a better position than it was a year ago. “We see a much clearer path” in 2022, he said.

Boeing Chief Engineer Greg Hyslop said recovery begins with the company’s 52,000 engineering staff. “We’re going to lead with engineering excellence,” he said.

Both executives deflected or flatly refused to answer questions about the engineering design mistakes that led to the two fatal 737 Max crashes that have so damaged Boeing’s image.

This is a tough moment for Boeing.

The company is loaded with $42 billion of net debt; manufacturing defects have halted deliveries of its 787 Dreamliner; the Max is back in service but its sales badly trail the competing Airbus jet.

In 2021, settlements with the U.S. government and victims’ families largely lifted the legal threats flowing from the two tragic crashes. Yet the reputational damage lingers. A new book and two major feature documentaries set to air in 2022 all portray a steep cultural decline at Boeing.

And the pandemic continues to paralyze international air travel.

While Deal professed optimism for the new year he was careful not to overpromise, perhaps wary of seeming to dictate a recovery schedule that depends heavily on Federal Aviation Administration approval.

Sitting down inside the jet delivery center at Seattle’s Boeing Field for his first substantive interview since taking over as CEO more than two years ago, Deal dismissed the view among some industry analysts that Boeing’s leadership lacks the vision to pull it out of its series of travails.

“You do have to reflect on what has happened. Learn from it. We’ve certainly dedicated ourselves to that mission,” Deal said.

He said the Max’s return to service in most countries made 2021 “a year of stabilizing” that will enable further recovery in 2022.

By the time the FAA lifted the prolonged grounding of the Max a year ago, Boeing had parked 450 completed airplanes. By October, the backlog was reduced to 370 Maxes, and Deal said Boeing should clear “the bulk” of the remaining backlog in 2022.

After shedding 15,000 jobs in Washington state in 2020, then staying roughly level in 2021, he anticipates Boeing will hire several thousand people here this year.

“The future as I see it for Boeing is actually very bright,” Deal said.

Yet with the local workforce still stressed by uncertainty about its future, Deal offered no assurance about when and where Boeing’s next new plane might be built.

Hyslop is the top technical executive on Boeing’s leadership council. After the Max tragedies he was tapped to restore the company’s engineering culture.

He said Boeing has reorganized its engineering so business managers will have less influence on safety decisions and engineers more autonomy.

However, he declined to address how the engineering design process failed to flag the flaws in the Max’s flight control system that led to the crashes that killed 346 people in Indonesia and Ethiopia.

“I wasn’t there. I don’t know. I wasn’t in that room,” Hyslop said. “I’m not going to go back over the past. But I will say this: We all carry that with us heavily.”

Deep concern among aviation analysts

Aviation experts and financial analysts are worried about Boeing’s future and its competitive position against its only rival, Airbus.

In an interview, Adam Pilarksi, senior vice president with aviation consulting firm Avitas, said Boeing’s top leadership has not provided a vision of a way forward.

“You have to let the aviation community, your suppliers, your customers, know where you are going,” he said.

In contrast, top executives at rival Airbus have exuded confidence and laid out plans.

In the smaller airliner category — the high-volume cash cow of the jet manufacturing business where Boeing’s 737 Max competes head-to-head with Airbus’s A320neo — Airbus has a strong advantage and is maneuvering to keep it.

While Boeing hopes to get production up to 31 Maxes a month early in 2022 and ramp up cautiously from there, Airbus is already building 45 per month of the competing A320neo, and is sticking to its target of building an unprecedented 63 per month in 2023.

Airbus executives have touted a sustainable future of hydrogen-powered airplanes in the 2030s. While that may prove a mirage technically, Boeing simply won’t discuss plans about future airplane designs amid doubts that it has the financial wherewithal to launch one in the foreseeable future.

“I did talk to some very big financial institutions and they were very skeptical about Boeing’s continued success,” Pilarski said.

Richard Aboulafia, a managing director at consultancy Aerodynamic Advisory, likewise perceives an “absence of leadership” at Boeing.

Following the financial collapse and breakup of General Electric, Aboulafia speculates that pressure could mount to monetize Boeing’s defense and space assets by splitting them off.

While such a reversal of the 1997 merger with McDonnell Douglas might sound appealing to employees in the Puget Sound region, it potentially could have very negative consequences if the Commercial Airplanes division were left with most of the debt.

Aboulafia also fears Boeing’s top leaders are willing to accept “a serious market share loss” in their failure to launch a plane to counter the hot-selling Airbus A321neo, the largest in the A320neo family of narrowbody jets.

With Boeing’s 737 Max now reduced to a 40% share of the market against the A320neo, Rob Stallard, an aerospace analyst with Vertical Research Partners, told investors last month that Airbus is set for a “decade of dominance” in that smaller jet sector.

Also last month, Ron Epstein, an analyst with Bank of America, wrote that “Boeing’s engineering strength and R&D spending, now near 10-year lows, could pose a risk to Boeing’s ability to develop” a new plane.

Revamped engineering culture

Hyslop insisted that the reorganization of the technical staff at Boeing prompted by the design failures that led to the Max crashes will “strengthen and elevate engineering in the company.”

All Boeing’s engineering staff now report up through the technical ranks to him, taking some control away from managers focused on the business side of the operation.

As Deal put it, this change was made “so that there was a clear line of accountability for engineering. And no risk of this blur of business relative to pure technical excellence.”

Boeing’s development of the Max was criticized for allowing business goals to brush aside technical safety concerns — such as the decision that mandated only cursory training for pilots to transition from the previous 737 model to the Max.

Every week, Hyslop and Deal now attend a top-level safety meeting with overall Boeing CEO Dave Calhoun as well as the heads of the Defense and Space and Global Services divisions and their chief engineers.

And Hyslop said he’s begun a major internal initiative requiring senior engineers across the company to write detailed accounts of their design practices to ensure they are strictly adhered to in the future.

“It’ll provide a place where lessons learned can be quickly incorporated and then it will feed into future designs,” Hyslop said.

One key lesson has to be how those engineering processes missed the flaws in the design of the Maneuvering Characteristics Augmentation System flight control software on the Max — the most glaring of which was its dependence on a single sensor.

A month after the second Max crash in March 2019, former Boeing CEO Dennis Muilenburg insisted that the Boeing engineers who designed MCAS “followed exactly the steps in our design and certification processes that consistently produce safe airplanes.”

But if Boeing has established where exactly the engineering scrutiny of that software faltered, it isn’t sharing the information.

Asked if any engineers had been held accountable for that tragic miss, Hyslop responded “I’m not gonna answer that question” and Boeing’s public relations staff intervened to shut down that line of inquiry.

In a more open exchange, Deal offered a rationale for not pointing to individuals with blame: He said Boeing seeks to “create a just culture … not a punitive culture.”

A “just culture” — the standard for National Transportation Safety Board investigations into air accidents, whether fatal or not — is an approach whereby investigators try to find out what went wrong and fix it for the future, without blaming any individual for mistakes short of negligent or reckless behavior. The idea is to encourage those involved to come forward and be open about what happened, rather than hiding details of their errors to protect themselves.

“You look at why were the mistakes made, what learning can be taken away,” said Deal, “And how do you translate that to your design ecosystem.”

Pilarski of Avitas points to a more self-serving motivation.

“They don’t want to admit what went wrong” in the Max crashes, Pilarski said. “They are in for a lot of legal liability.”

Digital transformation

The question of when Boeing will next use its revamped engineering organization to design a new airplane is a critical one.

Most analysts see what aviation analyst Aboulafia calls “a gaping hole” in Boeing’s jet lineup.

The Airbus A321neo is a large narrowbody jet seating more than 200 passengers and with the range to comfortably fly transatlantic or other regional international routes. The largest Max, the Max 10, is not yet certified and cannot match its performance.

Sales of the A321neo have skyrocketed as airlines buy them for routes previously flown only by larger, much more expensive widebody jets like the Boeing 787 and the Airbus A330.

The Airbus jet has essentially created a whole new airplane segment by itself, racking up more than 4,000 orders at Boeing’s expense. In significant customer defections in December, both Qantas of Australia and KLM of Holland passed up on the Max and ordered the A321neo to replace their aging 737s.

To compete, most analysts think Boeing needs to design an all-new airplane, a narrowbody jet larger than the Max and smaller than the 787.

“The necessity of doing exactly that plane is just getting more clear every day,” Aboulafia said.

Boeing doesn’t agree. Deal, while conceding disappointment in those recent losses, declared himself content with the Max 10.

“I’m not in a rush right now,” he said. “There will be a next new airplane. The when, the how, the where, have yet to be answered.”

Both he and Hyslop said their focus now is not on designing that next new aircraft but on perfecting the digital modeling technology that Boeing plans to use to simulate the design and manufacture of future planes before any assembly lines are built.

Hyslop said Boeing intends “to design the factory to the same level of rigor we design that airplane” and to “build the first several 100 airplanes in a simulation.”

As Deal concedes, this is not Boeing’s first attempt to implement the concept — and the previous effort is not encouraging.

Back in 2004, Boeing trumpeted the same ambition for the 787, promising that not just the plane but the entire manufacturing system would be digitally created and tested before it was a physical reality.

Yet not only was the 787 the most delayed, troubled and financially disastrous jet development program in Boeing’s history, but 10 years after its initial delivery, manufacturing defects — tiny gaps at major structural joins — have put a stop to all but a few deliveries for the past 14 months.

In an otherwise upbeat take on Boeing’s prospects for 2022, financial analyst Seth Seifman of J.P. Morgan pushed out his projection for when Boeing will resume 787 deliveries until the third quarter — starving it until then of the cash those jets should bring in.

In October, Boeing projected the cost of all the extra work to fix the 787 manufacturing quality defects would be $1 billion. That estimated cost will keep growing as long as the deliveries are stalled.

Aboulafia is astonished at the prospect of the 787 delivery halt potentially stretching past the first half of the new year.

“What’s going on here? And why isn’t there any kind of clear, level explanation?” he asked. “It’s just bizarre.”

Deal declined to say when in 2022 deliveries of the 787 might resume.

“I’m not going to rush my regulator,” he said, referring to the FAA, which is closely scrutinizing Boeing’s proposed fixes to ensure that every plane meets the required technical specifications.

Boeing’s now frayed relationship with the FAA is “improving, but we have work to do,” Deal added.

In addition to resuming 787 deliveries sometime in 2022, Deal anticipates ramping up 737 Max production and getting the Max 7 and Max 10 models certified.

He also revealed that Boeing is currently designing a new “high gross weight” version of the largest Dreamliner, the 787-10, bumping up its payload and range to make it more competitive against the Airbus A350-900.

Deal anticipates too that the pandemic-induced shift in global supply chains will produce another bumper year of freighter jet sales, the one area of commercial aviation where Boeing still dominates Airbus.

Both he and Hyslop confirmed Boeing will launch a freighter version of the giant 777X, built in Everett.

Deal said the company will hire workers back in the Puget Sound region this year “in the thousands.”

With a labor market grown tight in the pandemic and with stiff hiring competition from Amazon, SpaceX and Blue Origin, Boeing currently has more than 5,000 job openings in the state, largely in quality, manufacturing and engineering.

To staff up again, Aboulafia said Boeing had better change its longtime labor playbook of working relentlessly to “crush unions and take away worker benefits.”

And yet, though Boeing clearly has a long path ahead if it’s to recover, Aboulafia said it’s not impossible.

“They still have seriously good people. The only thing that’s needed is leadership. Everything else is in place,” he said. “Yeah, there’s plenty of hope.”

“It requires vision,” Aboulafia added.

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