Gregory Travis and Marshall Auerback: Anatomy of a Disaster – Why Boeing Should Never Make Another Airplane, Again

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Yves here. Even thought this critique of Boeing might seem a bit….bloodthirsty…Boeing does have blood on its hands and has been astonishingly unrepentant about it.

Given the fact that Boeing is part of a duopoly of makers of large planes, and there is no plausible way that Airbus could take up the new orders slack, predictions of its demise would seem to be premature. But AIG was widely viewed as indomitable until it started its nosedive.

Another way to return Boeing to the community of adequately-behaved major corporations would be a housecleaning of its executive ranks, starting the the CEO, and the board, along with board reforms such as the creation of a safety subcommittee with clout. But the odds of anything like that happening look remote.

Why might Boeing be at much greater risk of serious trouble than it now appears? Huawei. China likely perceives that the US is engaging in hostage-taking, both close to literally with the extradition request for the CEO’s daughter, Meng Wanzhou, and the Trump Administration moving towards a blacklisting yesterday. From the Financial Times:

The White House and US Department of Commerce took steps on Wednesday night that would in effect ban Huawei from selling technology into the American market, and could also prevent it from buying semiconductors from suppliers including Qualcomm in the US that are crucial for its production….

The US Department of Commerce said it would put Huawei on its so-called Entity List, meaning that the American companies will have to obtain a licence from the US government to sell technology to Huawei. At the same time, US president Donald Trump signed an executive order declaring the US telecoms sector faced a “national emergency” — giving the commerce department the power to “prohibit transactions posing an unacceptable risk” to national security….

Paul Triolo, a technology policy expert at Eurasia Group, a risk consultancy, said it was a “huge development” that would not only hurt the Chinese company but also have an impact on global supply chains involving US companies such as Intel, Microsoft and Oracle.

“The US has basically openly declared it is willing to engage in a full-fledged technology war with China,” he said.

Huawei has few alternatives for critical semiconductors to Qualcomm, which would likely be denied an export license if the US follows through on its threat of putting Huawei on the “Entity List” (the second most stringent category, but still sufficient for the US to bar licensing). One is Murata, but Japan has joined the US ban on Huawei 5G products, and would presumably fall in line if the US were to ask Japan to tell Murata not to sell semiconductors to Huawei.

The advantages of China going after Boeing, as opposed to making life miserable for US technology companies, would be considerable. Targeting, say, Microsoft would be an obvious tit for tat. By contrast, China was the first country to ground the 737 Max, and its judgement was confirmed by other airline regulators and eventually the FAA. China does not have a credible competitor to Boeing, so it could wrap continued denial of certification of the 737 Max in the mantle of being pro-safety, even if independent parties suspected this was a secondary motive.

On top of that, Ethiopian Air’s forceful criticism of the 737 Max gives China air cover. Unlike Lion Air, which is widely seen as a questionable operator, readers who fly emerging economy carriers give Ethiopian Air high marks for competence and safety. One even wrote, “I have flown Ethiopian Air. It’s certainly far better than Irish-owned and operated Ryan Airlines (even though the latter has white pilots with nice Irish accents).”

Chinese interests have made large investments many countries in Africa, so it’s conceivable it could get other countries on the continent to follow its lead. Admittedly, China plus those countries collectively may not be large enough to do considerable damage to Boeing. But this action would break the hegemony of the FAA as certifier for US manufacturers, and that could prove crippling in the long run.

Another issue that hasn’t gotten the attention it warrants is that Boeing appears to lack the stringent software development protocols necessary for “fly by wire” operations. Boeing historically has relied on pilots being able to reassert control over automated functions’; Airbus has “fly by wire” systems as far more prominent and accordingly the expectation and ability of pilots to override these systems is lower.

However, many articles noted that MCAS took the 737 further into a fly-by-wire philosophy than it had been before. Yet Boeing was astonishingly lax, having only two angle of attack sensors, of which only one would be providing input to MCAS, and then on an arbitrary-seeming basis.

By contrast, the Airbus philosophy stresses redundancy, not only in hardware — they use not three but four angle of attack sensors — but in software, and even software development. “Two or more independent flight control computing systems are installed using different types of microprocessors and software written in different languages by different development teams” and verified using formal methods (“Approaches to Assure Safety in Fly-By-Wire Systems: Airbus Vs. Boeing“).

By Gregory Travis, a writer, a software executive, a pilot, and an aircraft owner who has logged more than 2,000 hours of flying time, ranging from gliders to a Boeing 757 (as a full-motion simulator) and Marshall Auerback, a market analyst and commentator. Produced by Economy for All, a project of the Independent Media Institute

“If we fly [the Boeing 737] again, we’ll be the last airline to fly them again,” said Tewolde Gebremariam, CEO of Ethiopian Airlines.

Almost immediately after the takeoff of Ethiopian Airlines Flight 302 on March 10, thefirst signs of trouble appeared. The Boeing 737’s two angle of attack indicators, one on either side of the aircraft, gave inconsistent readings. The left indicator suddenly recorded a dangerous angle of attack of 36 degrees, while the right one showed a benign 11 degrees.

In response to the angle of attack from the left side, the stick shaker on the captain’s side (left) activated. The stick shaker vibrated the pilot’s control column to warn of an impending stall. The co-pilot’s column, however, did not vibrate as it was activated from the right-side angle of attack sensor. This was the first indication to the pilots that the angle of attack sensors disagreed with one another.

In less than a second, after going from 36 degrees, the pilot’s left-hand angle of attack (AOA) sensor suddenly jumped to 75 degrees of angle of attack. If it were actually true that the aircraft pitched up that rapidly, the airframe would have broken apart.

It was not true, however. The sensor was faulty. Yet the Maneuvering Characteristics Augmentation System (MCAS) computer software did not disregard this obviously incorrect reading.

Six seconds later, the heater on the left-hand side AOA sensor changed state. Angle of attack sensors are particularly susceptible to malfunction when water from rain or a recent airplane washing gets into their guts. To prevent this, they are fitted with ice-melting heaters.

Two minutes after takeoff, the captain called for the airplane’s flaps to be retracted. Because the 737’s MCAS function does not activate until the flaps are retracted, the captain has unconsciously summoned his, and his passengers’, executioner.

Two minutes and 15 seconds after takeoff had passed. Because it was only reading the faulty left-hand AOA sensor and because that sensor was indicating a dangerous stall, the MCAS software activated for 10 seconds—spinning the trim wheels 46 revolutions—and pushed the 737’s nose toward the ground.

Ten seconds later, the pilots disabled MCAS by throwing the cutout switches. Next, they attempted to “roll back” those 46 revolutions manually but found that the aerodynamic forces were so great that the trim wheels could not be moved back by hand. Meanwhile, the captain asked his first officer to help him hold the control column back as the nose-down force commanded by MCAS was overwhelming his strength.

In desperation, they turned the trim cutoff switch back “on” so that they could use the electric motor to turn the trim wheel, which they could not move by hand. They were successful for a moment at un-winding it, but MCAS rapidly reactivated and drove the trim back nose-down. The trim wheels were rotating nearly 300 RPM, in the wrong direction, under MCAS command.

The pilots were helpless. The trim reached its nose-down stop, and the control column force necessary to keep the plane level overwhelmed the pilots. The plane eventually plunged into the ground at a 40-degree angle while traveling nearly 600 miles per hour, killing everybody on board.

This mishap is one of the most tragic illustrations of Boeing’s decline. It boggles the mind to consider how these issues escaped regulatory review and how the aircraft were deemed airworthy. This could only happen in an industry afflicted by a wholesale collapse of regulation and oversight.

Is the Boeing company even capable of building safe commercial airliners any longer? And should we expect to see the fatally flawed 737 MAX 8 return to service? In regard to the latter, no less than the CEO of Ethiopian Airlines has just said no.The evidence seems to indicate that public-sector regulatory oversight is incapable of reviewing manufacturers’ designs and ascertaining their airworthiness.

In short, it looks like the system has collapsed.

Shareholder Capitalism, the Military, and the Beginning of the End for Boeing

The fall of the Berlin Wall and the corresponding end of the Soviet Empire gave the fullest impetus imaginable to the forces of globalized capitalism, and correspondingly unfettered access to the world’s cheapest labor. What was not to like about that? It afforded multinational corporations vastly expanded opportunities to fatten their profit margins and increase the bottom line with seemingly no risk posed to their business model.

Or so it appeared. In 2000, aerospace engineer L.J. Hart-Smith’s remarkable paper, sardonically titled “Out-Sourced Profits – The Cornerstone of Successful Subcontracting,” laid out the case against several business practices of Hart-Smith’s previous employer, McDonnell Douglas, which had incautiously ridden the wave of outsourcing when it merged with the author’s new employer, Boeing. Hart-Smith’s intention in telling his story was a cautionary one for the newly combined Boeing, lest it follow its then recent acquisition down the same disastrous path.

Of the manifold points and issues identified by Hart-Smith, there is one that stands out as the most compelling in terms of understanding the current crisis enveloping Boeing: The embrace of the metric “Return on Net Assets” (RONA). When combined with the relentless pursuit of cost reduction (via offshoring), RONA taken to the extreme can undermine overall safety standards.

Related to this problem is the intentional and unnecessary use of complexity as an instrument of propaganda. Like many of its Wall Street counterparts, Boeing also used complexity as a mechanism to obfuscate and conceal activity that is incompetent, nefarious and/or harmful to not only the corporation itself but to society as a whole (instead of complexity being a benign byproduct of a move up the technology curve).

All of these pernicious concepts are branches of the same poisoned tree: “shareholder capitalism”:

[A] notion best epitomized by Milton Friedman that the only social responsibility of a corporation is to increase its profits, laying the groundwork for the idea that shareholders, being the owners and the main risk-bearing participants, ought therefore to receive the biggest rewards. Profits therefore should be generated first and foremost with a view toward maximizing the interests of shareholders, not the executives or managers who (according to the theory) were spending too much of their time, and the shareholders’ money, worrying about employees, customers, and the community at large. The economists who built on Friedman’s work, along with increasingly aggressive institutional investors, devised solutions to ensure the primacy of enhancing shareholder value, via the advocacy of hostile takeovers, the promotion of massive stock buybacks or repurchases (which increased the stock value), higher dividend payouts and, most importantly, the introduction of stock-based pay for top executives in order to align their interests to those of the shareholders. These ideas were influenced by the idea that corporate efficiency and profitability were impinged upon by archaic regulation and unionization, which, according to the theory, precluded the ability to compete globally.

“Return on Net Assets” (RONA) forms a key part of the shareholder capitalism doctrine. In essence, it means maximizing the returns of those dollars deployed in the operation of the business. Applied to a corporation, it comes down to this: If the choice is between putting a million bucks into new factory machinery or returning it to shareholders, say, via dividend payments, the latter is the optimal way to go because in theory it means higher net returns accruing to the shareholders (as the “owners” of the company), implicitly assuming that they can make better use of that money than the company itself can. It is an absurd conceit to believe that a dilettante portfolio manager is in a better position than an aviation engineer to gauge whether corporate investment in fixed assets will generate productivity gains well north of the expected return for the cash distributed to the shareholders. But such is the perverse fantasy embedded in the myth of shareholder capitalism.

Engineering reality, however, is far more complicated than what is outlined in university MBA textbooks. For corporations like McDonnell Douglas, for example, RONA was used not as a way to prioritize new investment in the corporation but rather to justify disinvestmentin the corporation. This disinvestment ultimately degraded the company’s underlying profitability and the quality of its planes (which is one of the reasons the Pentagon helped to broker the merger with Boeing; in another perverse echo of the 2008 financial disaster, it was a politically engineered bailout).

RONA in Practice

When real engineering clashes with financial engineering, the damage takes the form of a geographically disparate and demoralized workforce: The factory-floor denominator goes down. Workers’ wages are depressed, testing and quality assurance are curtailed. Productivity is diminished, even as labor-saving technologies are introduced. Precision machinery is sold off and replaced by inferior, but cheaper, machines. Engineering quality deteriorates. And the upshot is that a reliable plane like Boeing’s 737, which had been a tried and true money-spinner with an impressive safety record since 1967, becomes a high-tech death trap.

The drive toward efficiency is translated into a drive to do more with less. Get more out of workers while paying them less. Make more parts with fewer machines. Outsourcing is viewed as a way to release capital by transferring investment from skilled domestic human capital to offshore entities not imbued with the same talents, corporate culture and dedication to quality. The benefits to the bottom line are temporary; the long-term pathologies become embedded as the company’s market share begins to shrink, as the airlines search for less shoddy alternatives.

You must do one more thing if you are a Boeing director: you must erect barriers to bad news, because there is nothing that bursts a magic bubble faster than reality, particularly if it’s bad reality.

The illusion that Boeing sought to perpetuate was that it continued to produce the same thing it had produced for decades: namely, a safe, reliable, quality airplane. But it was doing so with a production apparatus that was stripped, for cost reasons, of many of the means necessary to make good aircraft. So while the wine still came in a bottle signifying Premier Cru quality, and still carried the same price, someone had poured out the contents and replaced them with cheap plonk.

And that has become remarkably easy to do in aviation. Because Boeing is no longer subject to proper independent regulatory scrutiny. This is what happens when you’re allowed to “self-certify” your own airplane, as the Washington Post described: “One Boeing engineer would conduct a test of a particular system on the Max 8, while another Boeing engineer would act as the FAA’s representative, signing on behalf of the U.S. government that the technology complied with federal safety regulations.”

This is a recipe for disaster. Boeing relentlessly cut costs, it outsourced across the globe to workforces that knew nothing about aviation or aviation’s safety culture. It sent things everywhere on one criteria and one criteria only: lower the denominator. Make it the same, but cheaper. And then self-certify the plane, so that nobody, including the FAA, was ever the wiser.

Boeing also greased the wheels in Washington to ensure the continuation of this convenient state of regulatory affairs for the company. According to, Boeing and its affiliates spent $15,120,000 in lobbying expenses in 2018, after spending, $16,740,000 in 2017 (along with a further $4,551,078 in 2018 political contributions, which placed the company 82nd out of a total of 19,087 contributors). Looking back at these figures over the past four elections (congressional and presidential) since 2012, these numbers represent fairly typical spending sums for the company.

But clever financial engineering, extensive political lobbying and self-certification can’t perpetually hold back the effects of shoddy engineering. One of the sad byproducts of the FAA’s acquiescence to “self-certification” is how many things fall through the cracks so easily.

AOA: A Recipe for Disaster

You can see this problem in regard to the AOA sensors in the Boeing 737 aircraft. Historically, these sensors have not been a particularly important metric in regard to commercial flying done by human pilots. Boeing neither put much effort into the AOA system, nor was it regarded as a particularly crucial safety consideration. This is why taking off with inoperative AOA heaters on a Boeing airplane like the 737 was never a big deal—the worst consequence would be an annoying activation of the stick shaker when it was clear the activation was erroneous.

However, AOA sensors become veryimportant in computer-controlled (“fly by wire”) aircraft, which is why the A320 has three AOA sensors and why having heaters working on two of the three is an airworthiness requirement.

When Boeing put MCAS on the new Max 8 737, it did make the AOA sensor a first-line flight-critical item. But it never went back and revised the Master Minimum Equipment List (MMEL) to reflect the AOA system’s new importance. And this didn’t get caught by the FAA because, as noted earlier, they were allowing Boeing to self-certify under the new rules. There wasn’t an independent set of eyes to catch the oversight.

The Cost of Building a Safe Airplane

Since these decisions were largely governed by bottom line considerations, what would it take to quantify the financial implications to Boeing of fielding a “good” 737 MAX? “Good” here means a version of the 737 plane that actually addressed the problems of the current MAX 8 model, whose aerodynamic instability led Boeing to the MCAS software Band-Aid “fix” (a software “solution” that supposedly addressed the problems thrown up by the engine’s modifications, but which in reality led to the tragic crashes in Indonesia and Africa).

Making a good 737 MAX would have involved three things:

  1. Fundamental changes to the 737 airframe to raise its height to fit the larger engines.
  2. A new aircraft type certificate, reflecting and acknowledging the changes.
  3. Costs of training pilots for what is, essentially, a new aircraft.

Let’s estimate the total cost of a-c, above, as $5 billion. That’s $5 billion more to make a “good” 737 MAX vs. the current “bad” 737 MAX.

These calculations reveal that, deploying the shortcuts that Boeing actually adopted, the “bad” 737 design yielded Boeing a profit margin of 21 percent per aircraft sold. By contrast, a “good” design, which properly incorporated better safety features, yielded a profit of 19 percent per aircraft. (At least according to our calculations.)

That doesn’t sound like that much of a decrease. In fact, a 19 percent profit margin, per airplane, sounds pretty good—especially for an aircraft that no longer has a greater-than-average propensity to dive for the dirt.

But it represents a 2 percent reduction in profit margins. When you evaluate that against the fact that the 737 program accounts for nearly half of all of Boeing’s profits and that the wizards astride the corporation have told Wall Street that they can conjure 1 percent to 1.5 percent annual profit increases, company-wide, the actions undertaken by Boeing’s senior management begin to make sense.

Boeing’s MCAS wizardry, to cast a spell upon the 737 MAX’s aerodynamic instability, then, bears all the forensic fingerprints of a panic. It was a cheap financial fix designed to safeguard a 21 percent profit margin. This despite the fact that designing the 737 properly would still have yielded substantial profits. True, Boeing wouldn’t have met its profit forecasts, which may have affected the stock price. But we would have avoided a situation whereby Boeing played the equivalent of Russian roulette with the airlines and, by extension, the passengers on those planes.

And here’s the likely fallout from this putrid exercise in greed: Boeing is probably done as a credible manufacturing concern. Its credibility has been shattered as the company has repeatedly failed to get out in front of the problem and even today keeps finding itself reacting to yet more damaging disclosures.

It’s somewhat difficult to impute motives, but Boeing’s upper management arrogantly seems to be making an implicit assumption that it can overcome this problem, on the basis that the flying public has very few alternatives to its increasingly flawed products. That may be true in the immediate short term, but surely Airbus and future competitors out of Asia are licking their proverbial chops thanks to the magnitude of the incompetence displayed here by Boeing.

Ironically, Boeing’s increasing resort to offshoring is foaming the runway (pun intended) for its future competitors. For some time now, the company has been engaged in instructing its future competition on how to build commercial airliners. The Chinese have been gobbling up U.S. aviation capacity, everything from Teledyne Continental Motors to Cirrus aircraft, at a breakneck pace. And, like a play out of Hart-Smith’s paper on what notto do, Boeing has been teaching the Chinese, in China, how to build commercial airliners.

For students of history, the irony of the capitalists having actually sold the communists the rope with which to hang themselves is, frankly, too much to bear. But the Chinese, like the Airbus consortium, can afford to take a long-term strategic view that a company captured by the disease of shareholder capitalism like Boeing clearly cannot. In China, the planes will be built domestically, and will not be subject to the arbitrary dictates of private portfolio managers; they will not be constrained by strategies that seem largely to be focused on meeting (or beating) an arbitrary quarterly earnings per share figure.

Boeing has no inherent capacity to plan for the future nor is the company’s leadership compensated for their strategic vision. Their executives are tactically compensated on the basis of the annual gyrations of the stock price, which constrains the ability to take the long-term risks and investment, much less evince concerns about engineering and safety that are a unique requirement of airliner building. They should be worried more about facing manslaughter charges. The negligence has become even worse since the 2005 regulatory reform that handed all inspection and certification of Boeing’s airplanes over to Boeing itself. It was not hard to predict the sad outcome of that denouement: a failed 787 Dreamliner program and, now, a 737 MAX 8 plane with nothing to show but bodies strewn across the desert and beneath the sea.

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  1. PlutoniumKun

    Just a point on alternatives to Boeing – there is one alternative ‘type’ that airlines can choose, and can make sense when oil prices are low – that’s to keep older aircraft in the air longer. Most airliners are still fully airworthy and have plenty of air miles in them when they are retired – the reason for retiring and replacing them is that the annualised costs of a new aircraft are usually lower. Even independently of this crash, a number of airlines over the past few years, notably, Ryanair, have slowed down their replacement rate – I’m not sure the reason, although I would guess its that low fuel prices mean the most efficient new models don’t pay for themselves on short haul routes.

    So the supply bottleneck may not be as severe as everyone thinks, airlines may be willing to hold off for a few years until Airbus can step up or Sukhoi/Tupolev/Mitsubishi/Embraer or Comac start producing competitive products (although I must admit I’d be very worried about flying any of those aircraft if political pressure is on the manufacturers to rush into production, this is precisely what seems to have screwed the Sukhoi Superjet).

    I think Yves is quite right that Boeing is a nice fat target for the Chinese. Airbus has long links in China, much longer than Boeing, so could well be working behind the scenes to encourage this. And for the Chinese, the fact that hitting Boeing would also be a blow to the Japanese (who are major subcontractors to Boeing) would be the cherry on top of the cake. And it can’t hurt the prospects of Comac either.

    Just one point on this:


    Much as I loath Ryanair and everything they stand for (I refuse to use their flights, even when cheaper/faster than alternatives), they do have an impeccable safety record. In terms of service, you can’t really compare a national carrier like Ethiopian Air to a budget short haul operator like Ryanair.

        1. Ian Perkins

          Not where I am, though it did say “you are almost out of free articles…”.

      1. JDM

        Interesting article. This part was eye-opening:

        One pilot accused the airline of employing flight simulator trainers that are not knowledgeable about “aircraft systems, Boeing procedures, or company procedures,” and failing to follow a syllabus for a pilot training course.

        “Across the board, 737, 767 [and] 777 [flight simulator] instructors not knowledgeable about the aircraft’s systems, Boeing procedures, or company procedures,” the pilot alleged in the complaint. “Overall, [Ethiopian Airlines] offers substandard training compared to industry norms,” the pilot wrote.

        The pilot also criticized Ethiopian Airlines’ coordination on specific flights, calling its dispatch office “a disgrace” and taking the airline to task for apparent safety oversights.

        “Crews never get accurate flight plans, fuel loads, latest weather or up to date information,” the pilot alleged.

        The pilot also noted that “non-normal checklists in the cockpit are not kept current, including complete omission of certain checklists,” referring to documents that instruct pilots on how to respond to “non-normal” equipment behaviors that can become dangerous.

        The pilot also harshly criticized the airline’s management style, alleging that a pressure to meet deadlines sometimes led flight crews to overlook maintenance requirements.

        “If a scheduled flight pushes back due to maintenance, mechanics are punished with a reduction in salary,” the pilot wrote. “Leadership style of the company is fear based. … This permeates all aspects of the operation and all departments. Nobody wants to be held accountable. Misunderstandings, conflicts, or errors are handled through punishment.”

        The pilot said the FAA should intervene. The agency regularly evaluates whether foreign countries meet U.S. standards for airline oversight, and has the authority to revoke authorizations given to specific countries.

        “It’s the duty and moral responsibility of ICAO, the FAA and JCAB to assure this airline is fully competent and compliant before allowing them to expand and continue their international operations,” the pilot wrote. “The traveling public deserves much safer air transport. Essentially, [Ethiopian Airlines] doesn’t have the infrastructure to support the giant influx of 787′s, A350′s, and 737Max’s on order. Safety is being sacrificed for expansion and profit margin.”

      2. EVM

        Also found this one, plane crashed, 90 dead. Bit dated, but similarities are striking….

        Ethiopian 302 Accident Summary






      1. JDM

        Boeing and Airbus, maybe some regional jets too.

        I don’t think any airline makes their own planes.

    1. d

      You could keep older aircraft longer, paying more for fuel, and maintenance. Both of which would be much higher

      Now the question is will 737 survive this fiasco? And Boeing

        1. JDM

          American retired its 747 quite a while back. Maybe you’re thinking Delta/Northwest? They had them until recently. Don’t think any U.S. airlines are using 747’s anymore.

          1. Yves Smith Post author

            Qantas is and they code share long haul flights with American. So yes, technically not American. That may be how my colleague saw an “American” flight with a 747.

            Cathay Pacific, Lufthansa and Virgin Air are still using 747s.

            1. JDM

              Ok, that explains it. Hard to tell sometime who you are really flying on when you buy a ticket.

        2. d

          Now American did fly older md80s, but they have been replacing them, since they were fuel hogs, with guests what?

          737s, course most were the previous version.

          And at the time they retired the md80s, oil was at about $100 a barrel

    2. Titus

      No, older Airplanes, suffer stress fractures each time they land, every year over 20 years decreases 0.05 the strength of the airframe.

      1. Harrold

        It is the pressurization and de-pressurization of the fuselage that you need to worry about.

  2. vlade

    If China Boeing certifications (not just Max), and it manages to get a few more states to do so (Iran, Russia, anyone?), it affects, I believe, not just landing and takeoffs, but also using its airspace. That would severely curtail a lof of Asia/Europe flights.

    That said, I’d be very very careful saying that politically driven aircraft company in China would be better able to compete with Boeing because the quarterly reports were missing. Political pressure can create the same if not worse outcomes.

    Look at Sukhoi SJ-100, the supposed showcase for Russian civilian aviation. And that with Russian having a long history of actually having built commercial planes (Tupolev, Ilyushin, Yakovlev).

    1. PlutoniumKun

      Yes, in all the fuss over the 737, its largely overlooked that the SJ-100 is having very similar problems with possibly similar roots. Sukhoi is of course a primarily military company and I’ve seen it reported that there was huge political pressure on Sukhoi to get the SJ-100 in production faster than they were comfortable with. While the SJ-100 may be TBTF from the point of view of the Russian government, it is hard to see foreign buyers expressing much enthusiasm for what seems to be such a flawed design.

      1. vlade

        My point is really that political pressure is no better than financial pressure. Both can lead to massive screw up. So betting that China (or whoever) would have a better aircraft just because the party can order it so is naive. I think it’s not just about production, but design too. The Moscow incident was after a lightning strike. Somethign has to be badly wrong for a lightning strike to take all electronics on a plane (airframe on its own should do a Faraday’s cage, unless it’s of course all carbon composite).

        As an aside, it is interestign they decided to name it Sukhoi, when Tupolev/Ilyushin names were arguably much more established commercially. I’d not be surprised if some of those were still operating somewhere.

        1. PlutoniumKun

          I agree with that – building airliners is very difficult indeed, as the Chinese and Japanese have shown with their struggles to build viable aircraft.

          I don’t know how the Russian aircraft industry is organised now, I assume there is a lot of integration between the various historic names (but even in Soviet days, the old bureaus were very competitive against each other). Perhaps ‘Sukhoi’ was simply considered a sexier name. But certainly there are airliners under development under the Tupolev name.

        2. pricklyone

          I cannot think of any reason save financial motivations why Chinese engineering and design should not be the equal of the West.
          The research papers I have seen have Chinese names on them, just as often as not, and we are training their engineers and scientists, as we have done for decades.
          The Chinese saw an opportunity to be the low cost manufacturer to the world, and turned it into a powerhouse. Now they only need to start competing on quality instead of price.
          If the “CCP” decides to make salaries competitive with the (falling) West, for the necessary talent, in conjuction with a lower cost of living in China, will many return home?
          The mode of thought that says the Chinese can only appropriate tech, is a dangerous illusion. Just because they CHOSE to compete on those terms in the past, does not mean they must in future.
          When they decide to be the best, instead of the cheapest, and have the political will to fund that choice, how you gonna stop them?
          Goldman Sachs?

        1. Anon

          If Boeing had implemented MCAS correctly from the beginning and there were no accidents to mar its rollout, would you still consider the MAX to be a flawed design?

          1. Synoia

            yes, because of its stall prone flight chateristic.

            I’d note a significand difference in large aircraft design between the “English ” and “American” schools.

            After the B52 and 707, the US school used underslung enginres, whereas the English chose engines buried in the wing root, see De Havilland Comet.

            The underslung engine causes nose up on thrust, the wing root engine does not.

            The underslung engine is somewhat safer when an enginre bursts, and provides better access for maintenance and replacement.

            1. EVM

              The Comet may not be the best example given its history, and of course De Havilland is no longer making aircraft and what was left of them was acquired by BAE.

              Also should not that pretty much every large commercial airliner built today has pod mounted engines.

              1. Synoia

                I’m well aware of the 3 dimensional cracking problem of the Comet 1, with its square windows.

                The characteristics of Aluminum were not well understood then.

                I’d point to the Lockheed Tristar as a different engine configuration, possibly to obviate all of the nose up behaviour of the under wing mounted aircraft.

          2. Darius

            The MAX is a bridge too far. They used an engine too large for the airframe then papered it over with MCAS. Boeing should have planned for a clean sheet design 15 years ago rather than get jammed up in the competitive situation that produced the MAX.

            1. Carolinian

              This is a common misconception. The MCAS was added to avoid having to recertify the Max as having different flight characteristics, not to keep it from falling out of the sky. Simulator training that imitated the new tendency to nose up could familiarize pilots with the new handling but Boeing didn’t want to do that because it would hurt sales. The reason the MCAS should have been called a critical part that required sensor redundancy–Boeing didn’t want to do that either apparently–was because the MCAS itself could cause the plane to fall out of the sky, as we’ve seen.

              At least this is my read of the Seattle Times investigation and they seem to be the ones most plugged in to company insiders.

              And this is a critical distinction as a belief that the plane is inherently not airworthy would require Boeing to recall and presumably scrap billions of dollars worth of airplanes.

                1. Carolinian

                  It would burn down Boeing and take all those union machinist jobs with it not to mention a huge blow to the US economy.

                  And in any case that’s not going to happen. The plane will be restored to service. I’ve seen no serious articles that say differently.

                    1. Which is worse - bankers or terrorists

                      Given all of its work with the defense department, it already effectively is nationalized. The MAX is an attempt to make a 737 fly like an unstable fighter plane anyways, except there is no training for the pilots for that instability. It is sort of merging the worst of the private and public sector.

                    2. Yves Smith Post author

                      No, the Defense biz is way smaller than the commercial side of the house. Commercial sales are 70% of the total. Don’t make stuff up.

    2. Marshall Auerback

      It’s part of China’s model. With its Made in China 2025 initiative, the Chinese government has announced a push for Chinese leadership in ten key industries, including advanced information technology, aviation, rail, pharmaceuticals, and others.This preceded the Boeing 737 fiasco. It’s a longstanding part of their economic development model.

      1. vlade

        Yes, but it still doesn’t mean the resulting design will be any good. There was a lot of “made in SU” drives (for items that they could not import from the west, like semiconducters), including a lot of design stealing (like intel’s 8080 chip), but most of them failed miserably.

        1. Joe Well

          The USSR had nowhere near the same access to US industry.

          American companies are training their own replacements in China.

    3. Yves Smith Post author

      I never once suggested a Chinese manufacturer would be the beneficiary of this strategy. You are straw manning me. I was explicit that large commercial aircraft manufacture is a duopoly.

      In fact, China would have clean-looking hands in going after Boeing because it didn’t have a credible national manufacturer as an alternative, unlike the US targeting Huawei.

      Ten years out is a different matter. The Chinese think in those terms, the US doesn’t.

      1. vlade


        Emphasis mine.

        This is not yours, but it is in the post. It says that the CCP (because stuff like this will be run by CCP, directly or not) will run it better than private ownership, because it will not have the constraints the private ownership has.

        1. Marshall Auerback

          They’ve done a pretty good job in other areas which have been state led.

        2. Yves Smith Post author

          In context, you were linking the idea of the 737 Max losing a lot of appeal immediately if the Chinese and others refused to recertify the plane, with a point made by Marshall about China’s long-term ability to compete with Boeing when these were independent arguments. You were creating the impression that I had argued that China could pick up sales from Boeing now, when I had said no such thing and Travis and Marshall took pains to stress that China had long-term, not immediate, potential to be a serious competitor.

          1. kemerd

            Not Chinese but Russians actually have a comparable aircraft almost ready to be certified MC-21, all components Russian. They also have a joint project with Russia to produce a long range wide body aircraft. So, China can replace Boeing aircraft at least in the medium term. And, China-Russia duo can bring credible competition to the civil aviation duopoly, making Boeing’s position even more difficult.

    4. Ron D

      And Russian planes were always known for being simple and robust. Shame that has changed since 1991

      1. rowlf

        You may want to compare engine life between Soviet Union/Russian engines and western engines. A large western airliner engine can see 30k flight hours on wing now and will be removed for instability instead of EGT margin. In the early 1990s we thought going over 12k was amazing. Compare that to Chinese and Russian engines that spit their turbines out the tailpipes.

        For a Chinese or Russian commercial aircraft also check how many western parts are needed in the design.

        1. kemerd

          Russians have actually MD-21, almost ready. 100% Russian including engines and avionics. So, no sanctions.

          They also have SU-100 Superjet, which is being remodeled due to western parts that cannot be obtained. Iran will buy quite some of them once the process is complete and apparently they are near there.

  3. PlutoniumKun

    To more directly address the article, this confirms very much the arguments in yesterdays article about industrial policy. The US has an industrial policy for aerospace – basically ‘put billions into military and hope some of it benefits civil aviation by way of overspill’. If the US had a real civil aerospace strategy, it would never have allowed McDonald Douglas to be merged into Boeing and the MD series to die. The US is more than big enough for two competing civil airline companies.

    There is also I think an increasing problem in that military aircraft are now almost entirely diverged from civil aviation in terms of engineering. Government money to design and build B-52’s led directly to the development of 7-series civil aircraft – they are basically the same thing, just different shaped bodies. But in terms of materials construction, electronics, even basic aerodynamics, there is no relationship whatever between a B-2 bomber and a modern airliner. So the ‘trickle down’ of defence investment is no longer benefiting civil aviation.

    A sensible strategy would first of all split Boeing up between defence and civil as the very first item on the agenda.

    1. Lambert Strether

      Unfortunately from a financial perspective, if Boeing’s cash cow, the 737, just turned into a dog, the “Good Boeing” would be the military side, and the “Bad Boeing” the civilian side. What then?

      1. PlutoniumKun

        I’m sure some Chinese businessmen would be more than happy to buy up the designs and plant for the existing aircraft. There might be a little question though as to where they’ll be built….

        1. PlutoniumKun

          More seriously though, I would see the future of a civil Boeing as a hook up between it and Mitsubishi and Embraer. Between the three of them they could maintain an impressive array of aircraft. There would be quite a cultural clash though.

          1. The Rev Kev

            Maybe the US government can come in and help. In aircraft talk, it would be a bravo-alpha-india-lima-oscar-uniform-tango.

          2. Olivier

            Mitsubishi?? In the wake of the Ghosn imbroglio, which western companies and executives in their right mind would want to get deep in bed with a Japanese company? Japan is only slightly less dangerous for foreigners than China.

      2. Kris Alman

        But when real engineering clashes with financial engineering, the damage takes the form of a geographically disparate and demoralized workforce

        The United States has had a delusional view about education and the workforce, which is evidence in a graphic on p. 6 of this 2007 report; “Tough Choices Tough Times: The Report of the new Commission on the Skills of the American Workforce.”

        The Prototypical U.S. Industry in 10 years if all goes well?

        Obviously, with manufacturing outsourced to “less developed countries,” the jobs in these countries would amount to routine work done by both people and machines. American workers would then enjoy creative jobs in research, development, design, marketing and sales and global supply chain management.

        On p. 5, the report also points out:

        In this environment, it makes sense to ask how American workers can possibly maintain, to say nothing of improve, their current standard of living. Today, Indian engineers make $7,500 a year against $45,000 for an American engineer with the same qualifications. If we succeed in matching the very high levels of mastery of mathematics and science of these Indian engineers — an enormous challenge for this country — why would the world’s employers pay us more than they have to pay the Indians to do their work? They would be willing to do that only if we could offer something that the Chinese and Indians, and others, cannot.

        Even Marco Rubio is beginning to smell the rot of corporate greed and the “shareholder primacy theory”

        As Rubio says:

        At its core, the problem is that, beginning in the 1970s, the primary objective for companies became maximizing return to shareholders, and that came at the expense of investing in new capacities and in innovation. In essence, it’s coming at the expense of the things that lead to growth. In key industries that are critical to our national security and our national interests, that’s even more problematic.

  4. Richard H Caldwell

    An embarassingly-juvenile error right at the beginning of an otherwise-excellent “angle of attack” on Boeing’s shareholder capitalism.

    A 10% return on a $million is $100K, not 1.1 $million. Eeesh….

    1. DSB

      My thought exactly. Couldn’t read the rest after seeing this.

      From Investopedia: Example of How to Use RONA

      “Assume a company has revenue of $1 billion and total expenses including taxes of $800 million, giving it a net income of $200 million. The company has current assets of $400 million and current liabilities of $200 million, giving it net working capital of $200 million.

      Further, the company’s fixed assets amount to $800 million. Adding fixed assets to net working capital yields $1 billion in the denominator when calculating RONA. Dividing the net income of $200 million by $1 billion yields a return on net assets of 20% for the company.”

      1. boz

        AKA RoE or Return on Equity:

        From the accounting equation: Assets = Liabilities + Equity

        Net Assets = Assets – Liabilities

        Net Assets = Equity

    2. Lambert Strether

      Richard, DCB:

      Thanks. From an abundance of caution, we’ve deleted the passage in question, and will restore it with corrected figures as soon as possible.

  5. MickeyZ

    A minor quibble with an otherwise excellent article but is not the math indicating a 110% annual return, not 10%?

    1. Marshall Auerback

      It was a typo. Unfortunately not caught in time. We were trying to make it visually easier on the eye and screwed up. Mea culpa.

  6. Adam1

    To me one of the most damning things about Boeing’s implementation of MCAS on the 737-MAX is that it actually knew how to do this properly, but no longer seems to be capable of leveraging what should be institutional memory. I’ve only seen it mentioned once, but on a Montour Pilot video the guy describes Boeing’s deployment of an MCAS system on a military fuel tanker jet it built in the 1980’s. They added the MCAS system on that plane to assist the pilots should its cargo fuel suddenly shift unexpectedly changing the plane position. The system had all of the design features that are missing in the 737-MAX MCAS system that brought about the 2 crashes. At the very least one would have expected that they’d just pull the specs off that MCAS system and say here write us a new one using these requirements. The fact that this obviously didn’t happen shows how bad things are at Boeing.

    1. fajensen


      Corporations don’t work that way. Internal Competition in Corporations are almost always a Tournament Game (everyone fights each other at each level. Only the winners, the dirtiest fighters, not necessarily the most competent on the business side, will make it to the few top slots). Then it goes how it usually goes, the business delivers sucky products and sucky R.O.I.’s.

      In most corporations, everyone hates and fears the other divisions who are always out for ones resources. Everyone is only united in their bigger hatred of Head Office, who is always (and with good reason and many historic examples) seen as a much bigger threat than the commercial competitors. These being represented by those genuinely nice, generous, people one will meet at conferences and go to bars with, to chat and check up the market for job opportunities!

      Thus, the division manager responsible for the working version of MCAS, will never just give that away for nothing so that The Competition can run a successful project on lipsticking the pig that is the 737-MAX, use those results to get the good ear of management and then move into the slot that the competent division manager actually deserves.

      Not only that, once there, the upstarts rising on the fumes from “savage the company billions of dollars” will immediately eliminate or diminish the competent division(s) and their managers to secure their position.

      She knows that if She helps “project lipgloss” succeed, she will get the CEO’s warm regards and a lucite slab for decorating her new desk somewhere in “Corporate Alaska”, whereas if “project lipstick” should somehow fail … then the cold corporate winds from “Mount Olympus” may change, there is perhaps a slot opening for someone with proven performance when the failure is punished with the “seeking of new opportunities”-ritual. In fact the worst-case outcome for the competent division head is that everything goes under the “now we must all look forward”-rug, and her position will be quite safe from being diminished for a while!

      In any large technical organisation there is *So much “Gold”* hidden inside private vaults.

      It never comes out and is used coherently “for the common good” because of the completion game. When head office close a site, it most often goes right in the dumpsters with the rest of the stuff, because: “They didn’t explicitly tell us to keep it. HQ are soo effing smart, they can effing figure it out for themselves for a change!”.

      It is tragic. If I knew how to fix this situation (and I tried several times), I would be rich enough to just buy up McKinsey and sack the lot of them!

  7. ChristopherJ

    I predicted Boeing would be ‘toast’ 24 hours after the second crash.

    You cannot buy trust with a shit product from country that doesn’t have any good values or morals that it pursues

  8. John Beech

    Good grief! Calls for Boeing to be dismantled plays right into the hands of the Europeans (Airbus) and China (Comac) plus Brazil (Embraer). E.g. our competitors. Wide dissemination hurts American interests. Especially because they don’t have a realistic basis in fact.

    – Or have people forgotten Boeing is America’s national champion?
    – Do folks have a clue how many jobs we’re talking about? (+150K before ancillary industries and partners, just direct empl0yment)
    – Have you the slightest clue what this would mean for import/export ratios?
    – When you look at an Airbus, haven’t you realized it looks an awful lot like a Boeing?
    – Ditto Embraer.
    – Ditto Comac.
    – Who in hell do you think invented almost all the technologies we have in large scale aircraft?
    – Have you forgotten about Air France 447, an Airbus A330-203 and the crash in the Atlantic?

    The last point is especially important to folks pointing at the putative design flaw of the Boeing (Me? I’m awaiting the final report because depending on newsies is downright stupid). Anyway, the A330 crash involved a genuine design flaw.

    Finally, t4o all the nervous Nellies fretting about stuff they know jack about . . . chill. And Susan, reprinting this is a disgrace if not outright treasonous to US national interests. Never have I been so glad for the limited reach of an entity like NC because this is akin to shouting fire in a theater. You are raising concerns and fanning flames about which you know squat! For shame.

    1. Ember Burns

      I feel sorry for you, to have lost your moral compass (if you ever had one). Your jingoistic ravings are sickening in light of the reality that hundreds of innocent people were murdered by corporate scum. It is only right and proper that countries such as France, Brazil and China take Boeing’s place. Or have you lost your faith in the “Market”?

      1. Peter

        The over the top jingoism and defense of a company that failed to ensure proper functioning of safety equipment led me to believe that this idiotic response can only be meant cynically directed against an industry on the wrong path

    2. Carolinian

      Thanks for your comment. Airbus has indeed had crashes related to their heavy use of automation and fly by wire technology. One should also point out that air crashes used to be far more common than they are today. The truth is that air travel is extraordinarily safe despite the two Boeing crashes and part of that is because computers and automation make planes and air traffic control safer (along with better training and procedures) , but only assuming the same care is taken with the software as the hardware. Clearly that was not the case with Boeing re the Max and their CEO definitely should resign or be forced out to help restore confidence.

      Finally if one wants to fret about airline safety then you might be more concerned about scheduled maintenance that is farmed out to low cost Central American companies or other airline cost cutting measures such as hiring poorly paid and relatively inexperienced pilots for the short hop subsidiaries that are now a staple.

      1. Cal

        Apropos your comment from today’s Sydney Morning Herald:

        A former Qantas captain who saved a passenger jet after a computer failure twice sent it diving towards the Indian Ocean has warned that pilot training needs to be bolstered to help deal with rogue systems in an era of greater aircraft automation.

        Mr Sullivan was captaining a Qantas A330 on a flight from Singapore to Perth in 2008 when an air-data unit sent incorrect information to other systems, leading to a flight-control computer twice commanding the aircraft carrying 303 passengers to nosedive.

        And this from the pilot:

        “We practise engine failures in the simulator – now we need to practise automation failures,” he said.

        “These automated failures are more exotic and you can’t just read about them in a manual or on an online course. You have to do it; you have to see it; you have to practise it.”

        The rest here.

        1. cnchal

          I wonder how many AI chips are on a plane? Ghosts in the machine, put there deliberately.

        2. The Rev Kev

          By coincidence, I was just watching an Air Crash Investigators episode on that flight the night before last. One major reason for that near crash was that there was a screw-up in the lines of code in a controller. Here is a clip about that flight where the pilot himself is talking about what happened using a model-

    3. The Rev Kev

      It was just a matter of luck that these two plane crashes happened overseas you know. This could easily have happened in a commercial flight in the US. Would you be saying the same if a 737 MAX came down trying to fly out of Dallas or LAX or O’Hare? Decades ago Ralph Nader came out with his ground breaking book “Unsafe at Any Speed” which led to massive improvements in car safety in American cars. Would you have opposed those safety measures because they would have given foreign car makers a bit of an edge? Think how many tens of thousands of American were never killed because of this change in safety with American built cars. It is the same deal here. And in a bit of irony, Ralph Nader’s grandniece was killed in the last 737 crash so you can expect to hear a lot from him before long.

      1. Carolinian

        The Seattle Times story in today’s Links gives a good overview of the pilot question. The gist is that foreign pilots often do have less experience than their American counterparts (because of less private aviation availability) but that Boeing knows that too and should not produce planes that real life pilots can’t fly.

        Emotional reactions to comments like the above from John Beech are missing the point IMO. Saying that the pilots in these crashes may have done better doesn’t let Boeing off the hook even if Boeing is trying to wriggle free in a mistaken attempt to evade responsibility. If nothing else the CEO’s ostrich like behavior is reason for him to get the boot.

        1. tegnost

          Fine. But I owe zero allegiance to any corporation, indeed imo it’s the other way around. The bailout of the worst people who were most responsible for 2008 could have led nowhere else but here, and that said it’s likely this is just the tip of the iceberg, If you crapify enough you wind up with crap, no matter how un-crappy things were when you started.

        2. vlade

          “the pilots in these crashes may have done better doesn’t let Boeing off the hook”

          This. In fact, I’d argue it makes it WORSE, if it’s true what is in a link in a comment above is correct.

          In such a case Boeing knowingly sold aircraft with a known significant difference to an airline with bad training practices. Their (the airline) pilots are even asking FAA to intervene – but I guess if it means fewer sales to Boeing, why would they, given how they outsourced the plane safety to B already?

          How’s that different from selling a gun to a known psychopath? Uh, I guess that’s actually ok in the US, so why not.

          1. Carolinian

            What is damning to Boeing is that they made a dangerous alteration to the plane–the MCAS–for marketing purposes and didn’t even bother to make sure it worked right. There’s no way they or their insurance don’t pay through the nose in lawsuits.

      2. John Zelnicker

        @The Rev Kev
        May 17, 2019 at 9:19 am

        Ralph Nader has written an open letter to the CEO of Boeing demanding that he resign.

        Sorry I don’t have time to look up the link. Gotta work.

    4. Synoia

      I admit. I know nothing. I’ve flown over 3 million miles, caused planes in flight to return brcause I noteced defects in the plane, and am an engineer with both a life long curiosotuy about engineering and systems.

      I’m a typical engineer. Yes I know swuat. But I can analyze machines, ask questions, and make deductions.

      Here is an Engineering question: Why did Boeing management pay for MCAS to be developesd?

      1. d

        Because of the new engines for the plane, which are much bigger than the old ones,causing the plane’s center of gravity to change, which lead to concerns about stalls. And the reason for the new engines, was because they are much more efficient than the previous engines

    5. JBird4049

      Good grief.

      “Patriotism is the last refuge of the scoundrel.” —Samuel Johnson

      I might be labeled an American nationalist, but really I have no problem accepting that other countries might not want to buy Boeing’s American made flying suicide machines for which the company is wholly at fault for. It is not loyalty, patriotism or even jingoism, but fanaticism to blame others for what the company has done to itself, to them and to us as well.

      1. Buckeye

        My version of the Samuel Johnson is this:

        “Patriotism is the FIRST refuge of an A-hole.”

      1. Carolinian

        I agree the remarks about NC are inappropriate and even offensive but the stuff about Airbus etc is correct and little noted here. Crusading against Boeing management is one thing, but surely it’s not in the US economy’s interest for Boeing to go under. Not that I’m an economist, but I believe I’ve read that elsewhere in NC.

        1. Lambert Strether

          It is, however, in America’s interest for the entire Boeing management to be gutted. That’s not going to happen by making the niceties a priority. Right now, the response from the institutional investors is to shoot the messengers. Of course, they don’t fly coach….

    6. False Solace

      Boeing is doing a perfectly fine job of self-destructing, NC is merely reporting on and analyzing the flames. Even if we don the patriotic blindfold you suggest and shut up about the mass homicide Boeing’s planes have caused, do you really think everyone else in the world is going to do the same?

      Besides, Boeing has ginormous defense contracts. Even if their civilian line craters their billions in military subsidies will keep them alive no matter how crappy their planes are.

    7. Stephen Gardner

      Wow! “Putative design flaw”? Putative?? Really? I put that in the same category as “putative harm from tobacco”. And I love this little gem of jingoism: “And Susan, reprinting this is a disgrace if not outright treasonous to US national interests.” So 300+deaths are ok as long as we can still chant “USA, USA!”. Articles like this are why I read NC. I can get jingoistic nonsense elsewhere. “Treasonous to US national interests.” What transparent nonsense! And don’t talk about jobs because the executives at Boeing are doing their best to eliminate those American jobs. In the US these days there are no national interests only the interests of the real owners of this country. Hint: that ain’t me and probably not you either so cling to the vain hope that our economic system still serves the many.

    8. Ape

      This sort of deep nationalism is what I try to explain to other folks outside of N. America — in fact, most Europeans think that Americans are “like them” when in fact John Beech is characteristic of a very significant chunk of the US, especially at the very top of the game, which is quite distinct from the leadership of the satraps (naturally).

    1. Lambert Strether

      That’s why Boeing has a military side! So it would be really great if Boeing could manage their workforce such that wrenches and other debris weren’t left in the wings….

  9. Ember Burns

    I read this post this morning and I am still trying to deal with the monstrosity of it. So upsetting. A group of rich people practically committed mass murder and destroyed the livelihoods of thousands in order to become even richer. I am sickened to my stomach to think of all the people I love putting their lives in the hands of these psychopaths who will get away with (Mass) Murder most foul. Vicious, evil, criminals in suits.

    1. Lambert Strether


      You say that like it’s a bad thing.

    2. Oregoncharles

      Recently flew Southwest, probably on a 737, so yeah.

      As a practical matter, a number of reports detail obviously criminal behavior, like failing to report hazards they knew about. At this point, it’s a test of the criminal “justice” system whether Boeing executives are prosecuted.

      Admittedly, that may not be saying a lot.

  10. Watt4Bob

    Wide dissemination hurts American interests.

    Tell that to the American financial wizards who off-shored our jobs and with them the technologies they are based on, all in furtherance of the narrow interests of the investor class.

    Or have people forgotten Boeing is America’s national champion?

    Like GM was america’s national champion until it decided to dump manufacturing, and all those pesky employees, to go into finance?


    Where were you when China invaded the USA via Walmart to destroy our nations retail capacity?


    And who might I ask moved aircraft manufacturing to China and taught the Chinese to build American planes?

    Slam the barn door all you want, the cows are not only gone, they’ve been re-branded and all this was pro-actively enabled by America’s ownership class, the folks supposedly responsible for protecting American interests.

    1. Watt4Bob

      This comment was intended for Mr. John Beech, whose comment has disappeared.

      See the other reply by The suck of sorrow, below.

  11. S. Haust

    But they did already start housecleaning their executive ranks.

    A couple of weeks ago they put Nikky Haley on the board.

    Wasn’t that good enough?

  12. JDM

    Descent overview, but forecasts of Boeing’s demise as an aircraft manufacturer are way premature.

    1. Watt4Bob

      I don’t know, a plane that costs between $100-$135 Million to buy, and $Billions in liability judgements isn’t likely to fly off the shelves.


      Pun intended.

    2. Randy

      For Boeing maybe it doesn’t matter. They are a member of the MIC with commercial aviation as a sideline (hobby) business?

  13. The suck of sorrow

    John Beech May 17, 2019 at 8:02 am comment confirms my fears: we do live in a fascist state. How else can one portray corporate management criticism as tantamount to treason? Does Mr Beech place Ralph Nader in the same category on account of composing “Unsafe at any Speed”? At the time of publication the automobile industry was easily twenty percent of domestic economic output.

    What might drive Mr Beech’s strong emotion is the concern of unemployment for himself, family or friends. I think we, as in this country need to think seriously about providing a real safety net for those afflicted by corporate mismanagement. Like unemployment insurance, Boeing and other large entities can fund a pool for these disasters. Better managed companies will pay a lower rate. (Insert plug for uninversal health care here!) I propose this tax as a means to encourage “do the right thing” corporate mentality. MMT does not apply here as in single payer health.

    I close by stating that both we as a nation and Boeing as a corporation can do better. The improvements lie on differing tangents, but are both critically necessary.

    1. Susan the other`

      It has been said that medicare for all – national health insurance – will, in fact, make our corporations more competitive by eliminating the expense they carry of subsidizing the sleazy medical insurance industry. So that would be a step in the right direction for our corporations. Costcut the sleaze and keep the quality-maintenance expenditures. To that end another good cost cutting measure would be to eliminate the “services” of all the “dilettante portfolio managers” as they are easily as sleazy as health insurance companies.

      1. Randy

        That has been said since Truman and corporations have been against national health insurance since Truman. They know something everybody else doesn’t.

  14. Jim A.

    I’m betting that if you looked at the qualifications of those in the executive suite and the board of directors, you’d find more people whose experience is in financial engineering than aviation engineering. THAT needs to change and quickly.

    1. Ian Perkins

      That’ll no doubt be the reason Nikki Haley’s on their board. She has a background in finance and accounting, in addition to her prowess in bullshitting, browbeating and belittling the UN.

  15. Interested Party

    Not sure why you didn’t add a discussion of Boeing’s KC-46. This is the modified version of the 767 to be used as the latest and greatest version of the Air Force air re-fueling fleet. From what I understand, this adds an interesting dimension to your position that the problems at Boeing are from relentless cost cutting to maximize shareholder profits because the KC-46 is a cost-plus adventure where the taxpayer picks up the cost of Boeing’s failures. My information is that the delay in delivery of the KC-46 is quietly causing many unanticipated problems for the Air Force in their efforts to transition to the new aircraft. For example, I understand that there is a regular AF wing somewhere in the midwest where their former aircraft, KC-135s, were transferred to other units in anticipation of the delivery of the KC-46s. But presently the pilots have no planes to fly because the new anticipated delivery date has been pushed back to November. This article briefly describes the problem.

    Related to this is the fact that Boeing also does considerable other work for the military on a cost plus basis. I am informed that the AF is now taking delivery of modified KC-135s which have been re-fitted with “glass” cockpits virtually identical to the latest 737 cockpits. To my mind, this information begs the question: Can Boeing properly manufacture aircraft regardless of the profits involved?

  16. shinola

    A minor quibble with the article: While reducing the profit margin from 21% to 19% is just a 2 percentage point drop in that headline figure, it represents a bit over 9% cut in the actual margin (19 is @90.476% of 21). I believe that’s how it would be seen from the exec. POV.

  17. oliverks

    I am not sure the Murata reference is the correct one as you don’t really think of them as a big semi player.

    There are a number of internal chinese players that could edge out Qualcomm such as MediaTek, Rockchip, and Allwinner. MediaTek is the most advance, but in reality all 3 are mainly using technology from ARM. Another wild card is Samsung. It may license it chipsets to China, and they are very capable.

    What the US can do (and does do) is require you to buy chips from certain vendors to join certain networks. So if you want to be on the AT&T network you often have to source your chips from a very limited selection of suppliers.

    However, as the US market is relatively small in comparison to Europe and Asia, and because of the difficulty of working in the US market, you may see major vendors do fine by just ignoring the market entirely.


      1. oliverks

        I don’t have access to the FT, but I suspect they just got that wrong.

        Murata mainly does capacitors, inductors, and crystals. You can confirm that by just looking at their home page

        They do make some RF products, but they are pretty jelly bean, with multiple sources available from other players, like Broadcom, TI, Silicon Labs, … and a slew of stuff out of Asia.

          1. oliverks

            If they think they have competitive lines to the Qualcomm 6XX or 8XX line of chipset, I would be very interested in hearing about them.

  18. templar555510

    About ten years ago the English economist John Kay produced a wonderful book he called ‘ Obliquity ‘ . His thesis, with extensive evidence from all manner of human activity throughout the ages , was that almost any goal pursued directly was unlikely to succeed . The main subject of the book was however the pursuit of profit, which he showed with numerous examples, was most successfully achieved when it wasn’t pursued directly, but rather by pursuing first and foremost other objectives ; for example and perhaps most obviously quality with profit flowing from the achievement of that objective. Hence the title of the book . Again with examples he shows how corporations that reject the notion that they have responsibilities to employees and the wider society in favour of ‘ shareholder value ‘ simply wither on the vine. The fate of Boeing if it pursues its present stance is unlikely to be anything other than oblivion . Come on Boeing try some obliquity.

  19. montanamaven

    Has anyone mentioned Andrew Cockburn’s Harper’s article “The Military-Industrial Virus”? I’m late to this discussion but he talks about Boeing merging with McDonnell Douglas and how everything changed after that.

    That began to change in 1997, when Boeing merged with ­McDonnell Douglas, a defense company. In management terms, the merger was in effect a ­McDonnell takeover, with its executives—most importantly CEO Harry Stonecipher—­assuming command of the combined company, bringing their cultural heritage with them. The effects were readily apparent in the first major Boeing airliner initiative under the merged regime, the 787 Dreamliner. Among other features familiar to any student of the defense industry, the program relied heavily on outsourcing subcontracts to foreign countries as a means of locking in foreign buyers. Shipping parts around the world obviously costs time and money. So does the use of novel and potentially risky technologies: in this case, it involved a plastic airframe and all-­electronic controls powered by an extremely large and dangerously flammable battery.

    Cockburn goes on to talk about the 737 Max 8 and the Boeing V-22 Osprey which has had multiple crashes.
    Seems disturbing that the new Defense Secretary Shanahan headed up Boeing’s Missile Defense Systems and the Dreamliner program.
    In the same article, he mentions the book “Shattered Minds” about the faulty helmets worn by soldiers and Marines in Iraq and Afghanistan. They amplified the effects of the explosions on the brain and “were found to be dangerously vulnerable to bullets and shrapnel, thanks to a corrupt contractor skimping on the necessary bulletproof material.”
    I just saw the Broadway revival of the 1947 play “All My Sons” by Arthur Miller. The lead guy let faulty cracked engine parts go into airplanes with 21 WW II pilots crashing and dying.
    What’s good for business is not necessarily good for you and me.

    1. Christy

      It was actually linked to on NC under ‘Links’, ‘Imperial Collapse Watch’ on 5/13/19.
      Yes, it is a good article. Glad you enjoyed it.

  20. TG

    Yes yes, Boeing did a bad thing. But never build another airliner? You would prefer Airbus to have a monopoly? You would prefer to ride some nice Russian airliner? Yes this a tragedy, and it would be nice if some executives would go to jail, but Boeing nevertheless makes airplanes that let millions of people fly all over the world with risk levels that, while not zero, are very nearly superhumanly good (though to be admitted: this is largely because the public remains intolerant of errors in this area).

    Consider the anti-inflammatory drug Vioxx, apparently marketed on misleading claims, that some estimates put at causing “between 88,000 and 139,000 heart attacks, 30 to 40 percent of which were probably fatal, in the five years the drug was on the market” (wikipedia). Of course nobody went to jail and the company is still in business and printing money… No it doesn’t excuse Boeing in this case. But it should put Boeing’s misdeeds in perspective.

    1. bystander

      Ever heard of “Two wrongs don’t make a right”?

      Just because Merck got away with even a worse crime doesn’t mean Boeing should also get off.

      And Boeing has been dishonest (the deliberate effort to avoid recertification, the now-many instances of Boeing’s failure to inform or deliberately under-inform key parties like the regulators and customers about not just MCAS but other important changes in the plane) as well as exceptionally unrepentant. They acted in bad faith and show no intention of cleaning up their act.

      1. JBird4049


        Interestingly, it is usually the callousness or the open lying that makes people angry, not the act itself. Most people accept mistakes, stupidity, even incompetence at least once and often more as long as they not insulted by lied to or profit is not made off whatever went wrong. After all, we all make mistakes.

        Boeing refusing to make any apologies or accept any of the responsibility, but instead flatly lie is perhaps more damaging to it than the death machines themselves.

  21. baldski

    Well Boeing was sure doing the right thing by returning “shareholder value”. Since January its stock shot up 50% until the crashes started. Good job CEO.

  22. St Jacques

    Nationalise it. Fire the execs and throw the book at them. Mercilessly. Boeing is still a valuable and useful manufacturing company though it needs to be fixed. It’s strategically and psychologically too important for the US. That’s what I’d do if I were US dictator.

  23. Mickey Hickey

    China and Russia have entered into a joint venture to produce a 250-350 passenger, 9 abreast, twin jet designated CRAIC CR929. Flight trials starting 2023 with an in service estimate of 2025. The market share guaranteed is estimated to be 33.3%. This is not good news for either Boeing or Airbus. Boeing was founded in 1916 and was supported by the US government from day one.

  24. Dick Burkhart

    I took early retirement from Boeing in 2002 because I could see the handwriting on the wall – that Wall Street was taking over, that quality was going to suffer in future years. It’s happened just as I predicted.

  25. Steve Smith

    Boeing was a tool for acquiring and consolidating American aeronautical IP, it was scheduled for sale to China when Bush put America on a Green Energy death watch, even the entire US aluminum industry said so. Dont blame Obama, he merely continued Bush’s plans.

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