Two Boeing 737 Max airplane crashes in five months have put Boeing’s reputation on the line.
With a growing global market and orders rolling in for its best-selling 737, the aerospace giant was riding high. Now there are literally billions of dollars at stake at Boeing.
The fatal crashes are horrific accidents, devastating lives and passenger confidence. Global confidence in the jet’s safety has plummeted and Boeing is being heavily criticised for not acting sooner to ground its planes.
In March 2019 an Ethiopian Airlines Boeing 737 Max crashed shortly after take-off, killing 157 people. Just months earlier in October 2018 a 737 Max jet operated by Lion Air in Indonesia crashed, killing 189 people.
Boeing’s CEO Dennis Mullenberg extended “deepest sympathies to the families” of the 157 people killed on the Ethiopian flight, and said “we’re committed to understanding all aspects of this accident.”
In the days following the latest tragedy, regulators in China, the EU, India, Australia, Canada, Singapore and the UK quickly grounded the plane. The US Federal Aviation Administration (FAA) finally ordered the jets grounded on March 13. The fact the FAA took longer to ground the 737 Max did not sit well with airlines or travellers – damaging their own reputation in the process.
While the two accidents aren’t identical, there is widespread media chatter about similarities, and there are still many unknowns as the investigation into the cause gets underway.
But this week:
- Shares of Boeing dropped by 11 per cent.
- Investigators say that grounding could remain in place until at least the end of April – costing Boeing – and its customers – millions.
- Garuda Indonesia has reduced orders for the jets. Lion Air is rumoured to be switching to rival Airbus. Its expected more will follow.
- Boeing has temporarily halted deliveries of the jetliner – restrictions imposed by the FAA.
Boeing’s priority now is on investigating the cause and developing a fix. The longer it takes, the more it will cost the business financially and further damaging its reputation in the longer-term.
Counting the cost to Boeing’s reputation
Back in 2013 Boeing’s Dreamliner was grounded after battery fires. It cost the business months, and millions to fix the problem of redesigning the battery pack. No incidents with the Dreamliner were fatal.
In 2019, the negative headlines, investigations and share price take an immediate hit. Longer-term and until the cause of the accidents is known, it is unlikely that airlines will cancel all of their 737 Max orders. They’d lose money. But it is very likely that they’ll be seeking compensation to cover the costs of the plane’s grounding. Boeing could also face lawsuits from the families of those passengers who died.
Boeing is huge, and a company of its size is likely to be able to absorb high costs. But passenger backlash and crisis in confidence could continue and corporate customers could be lost – with airlines choosing to favour their untarnished competitors.