Boeing, still recovering from Max 8 crashes, is facing a new crisis

After two fatal crashes involving the best-selling 737 Max 8 planes five years ago, Boeing has spent billions of dollars to make its products safer and restore its reputation. Now the company is facing another wave of uncertainty and costs following a harrowing incident involving another 737 aircraft.

Just four weeks ago, a hole blew open in a 737 Max 9 jet on an Alaska Airlines flight shortly after takeoff when what appeared to be a poorly secured panel tore away. Alaska's pilots made an emergency landing as terrified passengers feared the worst.

The incident prompted the Federal Aviation Administration to indefinitely halt Boeing's ambitious plans to increase production of Max planes. Passengers have filed class action lawsuits against the company. And some irate airline executives are taking the rare step of publicly criticizing Boeing and expressing doubts about its ability to deliver planes when they were expected. The CEO of United Airlines has even gone so far as to suggest that his company could cancel some of its orders with Boeing.

A case that the company settled with the federal government for $2.5 billion in the waning days of the Trump administration to avoid prosecution could be reopened if the Justice Department determines that Boeing failed to meet the terms of the deal held.

Boeing has referred questions about that agreement to the Justice Department. A representative for the agency did not immediately respond to a request for comment.

Compounding problems for Boeing, the company said Sunday that a supplier had found a new problem with the fuselage of dozens of unfinished 737 Max planes. In a letter to employees, Stan Deal, the CEO of Boeing's commercial aircraft unit, said the supplier determined last week that “two holes may not have been drilled exactly to our requirements.”

He did not mention the name of the supplier. But a spokesman for Spirit AeroSystems, which is based in Wichita, Kansas, and makes fuselages for the Max, said a member of its team identified an issue last week that did not meet engineering standards.

Mr Deal said the problem was “not an immediate flight safety issue” but would force the company to rework about 50 aircraft, delaying their delivery.

Such delays, even if short-lived, could add up over time and lead to lower profits or greater losses for Boeing. The company lost $2.2 billion last year, following a $5 billion loss in 2022.

There is so much uncertainty surrounding Boeing that executives last week declined to provide a financial forecast for this year.

“Now is not the time for that,” Boeing CEO Dave Calhoun told Wall Street analysts on Wednesday. “We will not predict the timing. We will not anticipate our supervisor. We go slow to go fast.”

Since the Alaska Airlines incident, which occurred on January 5, Boeing shares have fallen about 16 percent late last week. They fell about 2 percent Monday morning after news of the delayed deliveries of the 50 Max jets.

Stewart Glickman, an analyst for CFRA Research, said Boeing could lose more market share to its main rival Airbus and even to much smaller manufacturers such as Embraer if the company's production processes “are not ironed out.”

When the panel, known as a door plug, blew off the Alaska Airlines plane, Boeing had not yet fully recovered from its latest crisis: the 737 Max 8 crashes that killed nearly 350 people in Indonesia in October 2018 and in Ethiopia in March 2019.

In a financial filing Wednesday, the company said it had paid $400 million to 737 Max customers in 2023, after paying $1 billion in 2022. All told, those two crashes and the grounding of the Max 8 for nearly two years cost Boeing about $20 billion.

Ronald Epstein, senior aerospace and defense analyst at Bank of America Global Research, estimated that the Alaska incident and its ripple effects — such as fines and spending related to oversight — could ultimately cost Boeing's 737 Max program $1 billion cost.

Mr. Epstein highlighted several factors that have contributed to the bleak outlook for Boeing, including the uncertainty surrounding the company's production system, as well as how increased scrutiny of the Max could impact another Boeing model, the 777X, which has already suffered delays in its production. FAA Certification. He added that it was not clear when the FAA would certify Boeing's Max 7 and Max 10, which are crucial parts of the company's production plans.

“We don't know what the slope of the slope will be,” he said. “We don't know how production will proceed. We just don't know.”

Before the Max 8 crash, Boeing was producing about 52 planes per month. The pandemic brought production to a standstill, but the business slowly started back up. Late last year, the company said it was producing 38 Max planes per month; it had said it planned to increase production to 42 planes per month this year, and to about 50 by 2025. But the FAA directive put those plans on hold, possibly for many months.

Complicating the road to recovery for Boeing is that it has a smaller and less experienced workforce than before the pandemic. As often happens when the economy slows, the company has laid off, laid off and bought out many experienced employees. When production restarted, Boeing had to hire or rehire workers.

But this time, Boeing, like other companies, has been unable to bring back many of the experienced workers who left during the pandemic, said Jason Gursky, an analyst at Citi who follows Boeing. Solving the workforce problem will play a major role in increasing production, according to Mr. Gursky.

Another potential problem for the company is that travelers could become more fearful of flying on their planes.

Unlike the Max crashes, which were caused by a fault in the plane's flight stabilization system, the January 5 incident appears to have been the result of a manufacturing defect. Workers at Boeing's Renton, Washington, plant appear to have opened and reinstalled the door plug, which later blew off at 16,000 feet. The National Transportation Safety Board will release a preliminary report on the incident in the coming days.

The distinction between design and manufacturing defects may not matter to passengers. a January survey YouGov and The Economist found that 29 percent of Americans rated the safety performance of the Boeing 737 Max 9 positively, while 32 percent rated it negatively; 40 percent said they didn't know.

Mr. Gursky, the Citi analyst, said the key to Boeing's recovery from the latest setback was simple: a return to “basic operations” by following regulators' guidelines, along with hiring more workers and avoiding bad publicity. After all, he said, most passengers are not attuned to the brand of aircraft they fly.

“People don't know if they're getting on a Boeing plane or an Airbus plane when they get on it,” Mr. Gursky said. “You won't know until you take the security card from the seat pocket in front of you.”

Richard Aboulafia, director of AeroDynamic Advisory, an aerospace consultancy, said he was not concerned about the company's financial strength but was concerned that the company was not doing enough to solve its problems.

“There is only one uncertainty: whether or not they will change to avoid irrelevance and possibly worse,” he said.