The Unraveling of Boeing’s Reputation: From Reliable to Uncertain
The esteemed reputation that Boeing had built over several decades as a dependable and reliable company has been put in jeopardy following a series of mid-flight disasters and a deterioration of the organization’s quality standards. Regulators, airlines, passengers, and even Boeing employees are expressing their discontent in the face of this crisis.
Boeing’s stock has suffered significantly as a result, with shares down 27% for the year, making it the second-worst performing stock in the S&P 500, only behind Tesla. The latest incident involving a Boeing 787 Dreamliner that experienced an unexpected plunge mid-air while flying from Australia to New Zealand, leaving several passengers injured, has added fuel to the flames. Although it remains unclear whether Boeing holds any responsibility for this latest occurrence, the accounts from the passengers have certainly raised eyebrows at a time when the company is already under federal investigation following the January door-plug blowout incident.
Brian Jokat, a passenger on Latam Airlines’ Flight LA 2114 on Monday, described the sudden drop in the plane as an experience reminiscent of The Exorcist. This latest mishap comes at a time when Boeing is already dealing with two fatal crashes that killed 346 people, substantial financial losses, hefty fines and settlements, and ongoing quality control issues.
The Federal Aviation Administration (FAA) is underfunded to the point of relying on Boeing for self-regulation, leaving it vulnerable to the company’s shortcomings. In fact, FAA Administrator Steve Dickson was reportedly surprised to learn that Boeing had failed over half of its audit at its production facility. Boeing has responded by stating it is working diligently to address the issues highlighted in the audit and develop a comprehensive action plan to improve safety and quality.
Boeing, often referred to as a duopoly due to its competitive standing with contact rival Airbus, holds significant importance in the American aviation industry. Its main clients are airlines that cannot easily switch to competing brands when displeased. Pilots are also certified for either Boeing or Airbus, making it challenging for airlines to change allegiances.
Considering its critical role in the aviation industry and the financial implications of the ongoing issues, Boeing can be classified as an institution that is too big to fail. Given its importance and the lack of competition in the market, consumers have limited options to hold Boeing accountable for its mistakes.
So, how can this problem be addressed? According to Gad Allon, a professor at the University of Pennsylvania’s Wharton School of Business, the first step towards regaining public trust is for Boeing to replace its entire C-suite. While this may not be a realistic solution, Allon believes that there isn’t a single individual within the company with the “C” title who is blameless for the current state of affairs.
Another idea that has been discussed involves nationalizing Boeing due to its significant dependence on government contracts and international sales supported by US officials. However, given the company’s current financial stability and the political implications of nationalization, this solution seems unlikely.
The larger concern for Allon is the potential frequency of these one-off scary events, as their impact could be catastrophic given the number of businesses worldwide that rely on Boeing planes. As Allon puts it, “the moment we start seeing these things as more recurring, I think it moves from being an ‘event risk’ to a ‘continuous risk’.”
The future of Boeing remains uncertain. The company faces numerous challenges, including restoring trust with its stakeholders and addressing the underlying issues that led to these crises. Only time will tell how Boeing navigates this tumultuous period in its history.
