Boeing's (BA) terrible year started with four bolts that apparently weren’t where they were supposed to be when the fuselage of a 737 Max 9 ripped open at 16,000 feet.
Three months after that harrowing incident aboard Alaska Airlines (ALK) flight 1282, the aviation giant faces lawsuits, government investigations, a tumbling stock price, declining margins, a tarnished reputation, and a leadership vacuum following the coming exit of CEO Dave Calhoun.
How this crisis unfolds during the rest of 2024 will have giant implications for an iconic American company, the wider airline industry, and the US economy.
Not only is Boeing a major employer of 140,000 people and supplier of jets to nearly all large US airlines, but it is also America’s single largest exporter.
A lot is at stake, and it is up to Boeing to convince customers, investors, and the American public that it has its many problems under control.
Here is a closer look at the five big threats it faces now:
Legal peril
Dozens of passengers filed civil lawsuits against Boeing after the Jan. 5 door plug blowout, creating legal headaches for years to come.
But the bigger danger to Boeing is the prospect of criminal liability.
The US agency with the authority to bring that action is the Justice Department, which has convened a grand jury in Seattle as it investigates what happened aboard the Alaska Airlines flight.
Passengers who were there that day have also received a letter from the FBI saying they may be victims of a crime. All 171 passengers survived, as did six crew members.
The DOJ is reportedly looking into whether events leading to that failure violated the terms of a deferred criminal prosecution agreement it reached with Boeing in 2021 to settle criminal charges connected to two 737 Max 8 aircraft crashes that killed 346 people at the end of the last decade.
Investigators concluded the crashes were caused by Boeing’s lack of transparency about a new aircraft maneuvering system on the Max called “MCAS.” Boeing admitted that two employees misled the FAA about that system.
The department agreed to set aside criminal responsibility so long as Boeing fulfilled the terms of the three-year accord. But if it concludes Boeing violated that pact, the jet maker could face prosecution on the original count of defrauding the US.
Boeing’s accumulated lapses — which include recent violations of US export laws — are giving prosecutors less and less wiggle room to handle Boeing with kid gloves, said Jacob Frenkel, a former federal prosecutor and white-collar criminal defense attorney.
He argues the door plug mishap is enough to charge Boeing.
"The simple question is: Why would you not criminally prosecute Boeing?" Frenkel said.
The challenge for the Justice Department in considering a guilty plea or prosecution is that a criminal conviction could potentially disqualify Boeing from certain government business — a devastating economic blow for a giant American manufacturer.
Heat from regulators
Boeing also faces new pressure from regulators to improve standards within its manufacturing plants and those of its suppliers.
While that work happens, its overseers are limiting Boeing’s production of new 737s.
The job of investigating exactly what transpired on Jan. 5 falls to the National Transportation Safety Board, the agency that discovered preliminary evidence that the four bolts were missing from the door plug that blew open during that flight.
NTSB Chair Jennifer Homendy told a Senate panel that Boeing had failed to cooperate in its probe and hadn’t provided the names of employees who worked on the Alaska Airlines jet, nor had it provided documentation on how the work was performed.
Boeing did later provide the names but also admitted it had no record of the work on the Max 9 panel that blew off in midair.
The Federal Aviation Administration, meanwhile, is taking a deep look at Boeing’s quality controls. And the news has not been good for Boeing.
The FAA said that a six-week audit prompted by the Alaska Airlines incident revealed “multiple instances” where Boeing and fuselage manufacturer Spirit AeroSystems (S9Q.F) “allegedly failed to comply with manufacturing quality control requirements.”
At Spirit, the agency even observed the use of hotel keycards and Dawn dish soap on the production line.
FAA administrator Michael Whitaker has been direct about his concerns. He told NBC after a visit to the company’s operations in the Seattle area that Boeing’s "priorities have been on production, and not on safety and quality."
When asked whether he thinks Boeing is too big to fail, Whitaker said, "I don't." They're too big "to not make a good airplane," he added.
Last month, Boeing was given 90 days to develop a plan to improve its culture and practices to meet FAA standards.
"The FAA was on site this entire time, so they're not particularly clean on this either," said Mike Boyd, an aviation analyst. "And they have to move their game up as well."
Cash burn
All of this regulatory scrutiny and a slowdown in production of its 737 Max are taking a huge toll on Boeing’s business.
It is burning through lots of cash. Last week, its CFO Brian West predicted a giant drain of up to $4.5 billion in the first quarter, meaning a massive loss. The margins in its commercial aircraft business will be a negative 20%, he said.
"We’re not at the moment where we can manage the near term for these financial outcomes because of the work at hand around stability," West said last week.
Boeing’s production problems are rippling out to the rest of the airline industry and frustrating executives with carriers who depend on orders from Boeing to maintain their schedules and routes.
Southwest Airlines (LUV) recently cut its capacity forecast, citing fewer Boeing deliveries than expected, and United Airlines (UAL) said it asked Boeing to stop building planes not yet certified by the FAA. Alaska Airlines has also said its capacity estimates are "in flux" due to federal scrutiny of Boeing.
Major airline bosses have so many concerns they asked for an audience with Boeing’s board to go over quality control and production questions.
"We've got to recognize that Boeing's problems are more than just one company," said Boyd, the airline analyst. "This is our biggest exporter. And right now today, it is relegating itself to a distant second behind the only other game in town, which is Airbus."
A tarnished reputation
Boeing’s reputation is undoubtedly tarnished by what happened on Jan. 5. What makes its task more challenging is that its reputation was already bruised before 2024 began.
It had spent the previous five years taking steps to recapture the trust of regulators and the flying public following crashes in 2018 and 2019 that killed all 347 people on board two separate 737 Max 8 planes.
The chaos aboard the Alaska Air flight on Jan. 5 resurfaced the concerns that Boeing had spent half a decade trying to quiet, and now every new revelation or report of other incidents provides Boeing with more damaging headlines.
They include Boeing planes that suddenly plunged mid-flight after a pilot said he lost control of the aircraft, "stuck" rudder pedals, an engine that belched flames midair, and a wheel that fell off after takeoff.
There was also news that a Boeing whistleblower died on the day he was scheduled to give testimony about safety concerns.
To make matters worse, in February, Boeing entered into a $51 million civil settlement over State Department claims that the company committed 199 violations of the Arms Export Control Act and International Traffic in Arms Regulations.
The government said Boeing employees in China illegally downloaded data from Boeing defense aircraft and missiles, resulting in unauthorized exports of technical data to the People’s Republic of China.
Boeing agreed to a corporate monitor to oversee its ongoing security practices.
Declining investor confidence
Another problem for Boeing is that investors are uncertain that Boeing and its management team can work their way out of the current mess.
The stock of Boeing is suffering. It has lost roughly a quarter of its value this year, shaving tens of billions off the company’s market valuation.
It is the worst performer in the Dow (^DJI) and the second-worst performer in the S&P 500 (^GSPC); only Tesla (TSLA) stock has fared worse.
The company made a dramatic move Monday to restore some confidence in its governance by announcing the exit of its CEO, Calhoun, who had served on the board since 2009 and was installed as CEO after the earlier crashes in 2018 and 2019.
The company also announced that Larry Kellner, chairman of its board, will not stand for reelection at the company's upcoming annual shareholders meeting. Steve Mollenkopf, the former CEO of Qualcomm, will replace Kellner and lead the company's search for its next CEO.
Boeing also said Stan Deal, currently CEO of its Commercial Airplanes segment, will retire.
In a letter to employees, Calhoun said the Alaska Air incident "was a watershed moment for Boeing."
"The eyes of the world are on us," Calhoun added, "and I know we will come through this moment a better company, building on all the learnings we accumulated as we worked together to rebuild Boeing over the last number of years."
Its stock rose 1% Monday following the announcement.
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