Last January, Boeing was poised for another record year. The company’s order book burst at the seams. Things seem to be going Boeing’s way.
In 2019, Boeing planned to step up deliveries of KC46 aerial refueling jets to the U.S. Air Force and the new 777 composite-wing jumbo jet was entering its critical test phases with plans to begin deliveries within the next two years. Boeing’s contracts for new aircraft climbed to 1,500 Dreamliners (787) and over 5,000 Max (737) jets.
The company is capable of handling increased production. Its mammoth manufacturing facilities in the Puget Sound Region are unlike any other in the world. The 64,000 workers assemble every Boeing jet used by airlines in those plants. Only Charleston, S.C., shares 787 production.
That is great news for Boeing and Washington. A healthy Boeing is critical to our state’s economy. It is Washington’s largest private employer and in 2017 the aerospace industry contributed $93 billion to our state’s economy.
Then the bad news hit.
In February, a second 737 Max crashed shortly after takeoff. The cause of the Ethiopian Air disaster appears to be similar to an incident in Indonesia last October where a Lion Air 737 Max plunged into the ocean. All 346 people on the two flights died.
By mid-March the Max was grounded pending the outcome of the investigations and Max modifications. As a result Boeing changed aircraft software, added another sensor to adjust the trim or pitch of the airplanes as it climbs to cruising altitude, installed new cockpit warning lights, and revamped pilot training. The fixes are currently under testing and review.
Boeing needs to get the 737 Max back into service—-safely and soon. It also must restore traveler confidence in the aircraft.
Here is why.
Looking ahead, Boeing projects worldwide need for new airplanes will grow rapidly between 2018 and 2037. During that time, Boeing forecasts delivery of 42,730 new airplane with a market value of $6.3 trillion. One third of that market is in China and neighboring Asia Pacific countries.
China is viewed as the largest potential Boeing buyer. Airlines in China alone expect to order 6,810 new airplanes worth more than $1.025 trillion.
China’s airlines also grounded 96 Max aircraft. “The grounding causes huge losses for Chinese airlines,” China aviation expert Li Xiaojin told Reuters. “Daily losses are likely to be at least 100,000 yuan ($14,500) per aircraft for each airline.”
The 737 has been the workhorse for most of the world’s airline since 1968. According to company reports last January, over 10,500 have been assembled at the company’s Renton plant. It has been Boeing’s “cash cow” which is greatly responsible for underwriting the 787 Dreamliner and the new 777 composite-wing jumbo jet.
“A Boeing 737 takes off somewhere every 15 seconds. As the world’s most popular airliner, nearly 3 out of every 4 airplanes Boeing delivers is a 737. As part of Boeing’s business, analysts estimate it accounts for half of Boeing’s airline revenues, about $30 billion a year,” according to KING 5’s Glenn Farley.
To put it into financial perspective, last year Boeing reported over $100 billion in revenue of which nearly $62 billion came from commercial airplane sales.
Boeing has faced serious challenges in the past and has had the resilience and ability to overcome and resolve difficulties. The company has the reputation of a premier manufacturer of commercial and military aircraft.
Boeing CEO Dennis Muilenburg told CBS anchor Norah O’Donnell “the crashes have had the “biggest impact” on him of anything in his 34 years with the company.” The impacts are deep and felt worldwide. Let’s hope the fixes fix the problems.
Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.
