The fallout for Boeing will extend far beyond the 737 Max 9 grounding

The New York Times described it as “Banquo’s ghost”, a reference to the murdered political rival that haunts Shakespeare’s Macbeth. The ghost following the McDonnell Douglas DC-10 after its fatal May 1979 Chicago crash — at the time the worst air disaster in U.S. history — was not the grounding which ended after 38 days and resulted in updates to both maintenance procedures and aircraft systems that would prevent a recurrence. Rather, it was the specter of another accident that would again threaten public confidence in the airplane.

There were two more fatal crashes at the end of 1979 involving DC-10s. Neither was the fault of the airplane, but they served to reinforce the impression that the airplane was somehow fatally flawed. By May 1980 the Times was describing a “pall” that had fallen over the aircraft.

Four decades later, the strategic risk to Boeing following two fatal crashes of its 737 Max was never going to be solely isolated to those accidents and the model’s subsequent grounding. While the facts and specifics of Lion Air 610 in 2018 and Ethiopian Airlines 302 in 2019 may have become fogged over time for the general public, the emotional memory is easily stirred, poking at barely healed scars.

Related: The DC-10, 737 Max and the struggle to polish a tarnished airplane

Another in a series of safety crises has again arrived at Boeing’s doorstep. The 737 Max 9, still the largest capacity single-aisle aircraft Boeing can deliver, is grounded in the configuration flown by Alaska Airlines and United Airlines — arguably the plane maker’s two closest customers and ones who have sworn by their confidence in Boeing and its products. That there was no loss of life or a more serious physical injury sustained by the 171 passengers and six crew aboard Alaska 1282 is nothing short of a miracle or a fortuitous roll of the dice.

Fixing the 737 Max in 2020 was viewed by many inside Boeing as a quantitative solution. Boeing could point to lines of code, updated manuals, and new training as the remedy to preventing a third crash. In 2024, the solution is qualitative — quite literally. Though it is not just a search to understand what quality lapse caused the left-hand plug exit to fail at 14,830 feet on Jan. 5, but also a wholesale look at how Boeing has been conducting its business. 

Related: Inside the strained union of Boeing and Spirit AeroSystems

Getting the 737 Max 9 safely back in service is priority one for the Federal Aviation Administration, Boeing and airlines, but the fallout for Boeing will stretch far beyond the Max 9. The precise duration of the Max 9 grounding remains uncertain with an iterative back-and-forth taking place between the FAA, Boeing and airlines on the inspection criteria. Yet, almost certainly, according to interviews with multiple senior executives at Boeing’s most important customers and suppliers, there is an expectation of significant new delays in certifying the 737 Max 7 and 10. 

“It’s almost surreal,” said one top U.S. airline executive of another Max-related grounding and the lack of clarity for airlines. “There’s no way out of this.”

2024 is lost?

By many measures, Boeing was exiting 2023 with the wind at its back. The aft pressure bulkhead quality issues that surfaced in August and originated with Spirit AeroSystems had subsided, and Spirit had a new CEO with a remit to right the operational ship with a new Boeing-centric strategy. The plane maker won record orders for twin-aisle jets over the prior year, and the 737 Max 10 had finally been granted a long-awaited type inspection authorization by the FAA, marking the start of certification flight testing for the last of five Max family members.

Crucially, at the end of December, the company unofficially delivered a pair of 737 Max 8 jets to China, according to those familiar with the transactions. The contractual deliveries mark a legal handover of the jets to their new owners and a significant economic thaw in U.S.-China relations, but Boeing won’t officially count either of the deliveries to China Southern Airlines and Air China until the aircraft fly away from the company’s property. (Boeing declined to comment on the deliveries.)

Related: Boeing wins key CAAC clearance on 737 Max deliveries to China

By pure coincidence of timing, in the hours before the Alaska accident, the Seattle Times published a sharply critical report regarding a Boeing-requested exemption to certify the Max 7, a plane designed for Southwest Airlines, without modifications to its engine anti-ice (EAI) system that is prone to catastrophic failure and damage to essential engine structure if it is left activated for five minutes in dry air.

Boeing, which decided to seek the exemption in November 2023, has said manual pilot deactivation of the anti-ice system is its near-term mitigation. (The procedure — a flick of a switch — was on display in September when The Air Current was invited by Alaska Airlines on a delivery of a new Max 9) The FAA has already approved this procedure for the 737 Max 8s and 9s, and Boeing has asked the FAA to apply that same approval to the Max 7 — and 10 by extension.

A series of exemptions

Both technically and politically, the request is the legacy of an earlier exemption, this one granted by Congress, that cleared Boeing to proceed with the Max 7 and 10 without a redesign of its antiquated master caution alerting system on the jet’s flight deck to the modern standard, the Engine Indicating and Crew Alerting System (EICAS) found on all its other jets. Such a system in operation on the Max, would, in theory, alert the crew to the anti-ice activation. Instead, it’s a memory item for flight crews. 

The FAA repeatedly pointed to Congress for that decision, vowing to implement whatever legislative requirement it prescribed. If Congress insisted on EICAS, the FAA would, too. Congress granted the exemption in December 2022, allowing Boeing to proceed with both airplanes with their legacy alerting systems, which remain common to not just the rest of the 737 Max fleet, but the vast global fleet of Next Generation 737s.

Related: Boeing exits 2022 with congressional exemption for Max

In the case of the engine inlet icing system exemption, the decision rests solely with the FAA at a time when the searing public spotlight of another Max crisis has returned. The spotlight, so far, has been pointed predominantly at Boeing and Spirit AeroSystems, but the agency is also vulnerable. The FAA has taken back responsibility for final inspections and airworthiness certificate ticketing for every single Max delivery since the airplane returned to deliveries in December 2020 after the U.S. grounding was first lifted.

On Thursday morning, Jan. 11, following three days of reporting by The Air Current and others, the FAA launched a formal investigation into Boeing’s quality control. “This incident should never have happened and it cannot happen again,” the agency said in a statement. “The safety of the flying public, not speed, will determine the timeline for returning the Boeing 737-9 Max to service.”

Related: Undamaged plug exit on Alaska Max 9 had fasteners tightened during assembly

A day later, the agency went farther, announcing an audit of the 737 Max 9 production system (the same system responsible for the Max 8). “It is time to re-examine the delegation of authority and assess any associated safety risks,” said newly confirmed FAA Administrator Mike Whitaker. “The grounding of the 737-9 and the multiple production-related issues identified in recent years require us to look at every option to reduce risk. The FAA is exploring the use of an independent third party to oversee Boeing’s inspections and its quality system.”

While the FAA digs deep into Boeing, multiple top leaders at its customers and suppliers see the Max 7 and 10 stalled, and the exemption for the inlet anti-icing issue is extremely unlikely to be approved in any reasonable timeframe if at all. 

Related: United finds loose bolts on plug doors during 737 Max 9 inspections

For the past two years, the FAA has been “trailblazing the new certification process” on the Max 7, a shorter version of the Max 8, said one top U.S. airline executive close to Boeing who declined to be identified because they were not authorized to speak to the media. That process was forged from the Max crashes. And, before the Alaska accident, Max 7 approval had already slipped into 2024 because of the inlet issues and the first Max 10s weren’t expected to be in United’s hands before early 2025. (A partial explanation for United adding 60 more A321neos to its backlog in October)

Southwest Airlines holds 302 of the estimated 357 orders for the Max 7, according to securities filings and ch-aviation. Another estimated 971 Max 10s are on order — making it Boeing’s second most popular single-aisle variant after the Max 8 — half of which are currently destined for North American carriers. More than a third of that backlog is for Alaska and United alone.

Related: Alaska Airlines, finally all-Boeing, ventures beyond the recovery

The FAA’s oversight has drawn sharp rebuke from key Congressional leaders, including Senate Commerce Committee Chair Maria Cantwell, who represents Washington state. Cantwell, whose constituents assemble 737 Max aircraft in Renton, said the recent accidents and incidents “call into question Boeing’s quality control.”

It’s not solely domestic pressure. The Government Accountability Office (GAO) noted in a just-released report that the 2019 to 2020 grounding of the Max “decreased validating [international civil aviation authority’s] trust in certifications performed by FAA and, in turn, increased scrutiny and information requests from CAAs when validating FAA-certificated products.”

Related: 737 Max grounding threatens to unravel the aviation certification world order

The industry leaders with whom TAC spoke noted the necessity of that earlier and current scrutiny, but acknowledged that public opinion had once again turned on Boeing, making other discussions unrelated to the Max 9, especially safety-related exemptions, a non-starter for the FAA. How will the FAA proceed? “That’s a political question, not a technical question,” said the top U.S. airline executive. “But it’s no longer technical.”

Another top U.S. airline executive concurred, sharing the skeptical view of the many executives TAC spoke with: “There’s no way” the FAA can move ahead on the exemption.

The exemption for the Max 7, which was published on the Federal Register on Dec. 4, 2023, would give Boeing “until May 31, 2026 [to] allow the certification and delivery of the 737-7 until design changes to the EAI system and engine nacelle inlet structure can be certified and available for incorporation into the fleet,” according to Gary Hamatani, 737 Max Development Chief Program Engineer in a petition to the FAA.

Related: Boeing’s 737 inlet issue drags on Max 7 certification

In short, denial of the exemption would push certification of the remaining two models of the 737 Max family into mid-2026 when a formal hardware fix would be ready, or force a larger and more expensive research and development effort to more quickly field the fix for expeditious certification.

Rejection of the exemption is not a certainty, according to a former FAA official. Yet, a significant new delay for Max 7 is certain, they said, as the staff responsible for reviewing and approving the EAI exemption have been “sidetracked” and drawn into the agency’s audit resulting from the Alaska accident.

The FAA did not immediately respond to a request for comment. Boeing said in a statement to TAC that the inlet exemption is being requested “under established procedures” and the eventual fix “will undergo thorough testing and FAA review before being introduced to the 737 Max fleet.”

Would those orders for the Max 7 and 10 go away if certification of the models is greatly delayed? Likely not, suggested several senior executives around Boeing’s ecosystem. Airbus is sold out. But the Max 8 and 9 variants its airline customers would end up taking in the interim years instead would come with hefty penalties paid out by Boeing that dwarf the immediate compensation to Alaska and United for their canceled Max 9 flights.

Related: United mega-deal sets carrier on a three-decade journey of constrained expansion

Combined with the intense FAA and Congressional scrutiny, this means a slower output (Max 9 deliveries remain halted, too) and shareholder ire over what will likely delay Boeing’s financial promises to Wall Street — $10 billion in free cash flows in 2026, for which its executives are judged.

This crisis is yet another hit to Boeing’s product strategy and struggling battle for single-aisle market share against Airbus, and a collapse of public confidence in its leadership. All of this adds together for the potential for profound change at Boeing in the weeks and months ahead.

The consensus among the senior executives, all of whom have a stake in Boeing’s success, is that the short, medium and long term solution — one of cultural and strategic change across Boeing itself and its most important supplier, Spirit — requires a human, not a technical, solution to vanquish that ghost.

Write to Jon Ostrower at jon@theaircurrent.com