Lessons Learned from an Industry Bankruptcy

It’s about trust

I remember riding our crew bus with a bunch of other pilots, and flight attendants in the spring of 1991 not long after our employer Midway Airlines had filed for Chapter 11 bankruptcy protection. The old red and white school bus ran the flight crews from the parking lot on Midway Airport’s north side parking lot along 55^th Street to the terminal so we could connect with our aircraft. Since pilots have all the solutions to every problem on Earth (just ask one) a bunch of us were complaining about the current state of the airline and our future. Being a big mouth – yes, even then – I wondered why Dave Hinson, our CEO was still running the place. “If Hinson was in charge when we entered bankruptcy, why should we expect he’ll be able to get us out?” After a few nods, the back of the bus was quiet for a few minutes before we moved on to complaining about the crew meals.

As it turned out, my worries about what the big guy at the airline’s helm would be able to accomplish continued as Midway Airline continued its decline. For a few weeks though, we thought there was a silver lining to the dark cloud we all found ourselves beneath when word came that Midway was about to be purchased by Northwest Airlines (Northwest was later absorbed by Delta). We were overjoyed that somehow the management team had managed to pull a save out from the throws of Chapter 11. Our celebrations were short-lived, however, when on November 12, 1991, Northwest informed Dave Hinson they were pulling out of the negotiations. The original Midway Airline ceased operation the next day on November 13, 1991.

After Midway

Many of those memories have come flooding back to me over the past few weeks as the latest crisis erupted at Boeing, a company also once headquartered in Chicago. The current mess began when a door plug ripped a gaping hole in the fuselage of an Alaska Airlines 737 Max 9 on January 5^th. Luckily no one was killed although many cabin items not tied down were sucked out of that fuselage hole when the cabin depressurized. It all could have been much worse. The door plug was eventually located in the backyard of a local high school science teacher. I think his name was Bob.

And what’s the connection between my former life at Midway and Boeing’s current jam? A bunch of Midway employees didn’t think Dave Hinson and the airline’s board of directors back then could save the ailing carrier. And as for Boeing? A recent story in Fortune magazine said, “Business pundits are watching closely to see whether CEO Dave Calhoun can lead Boeing through the aftermath of its latest crisis or if he’ll be replaced. But Boeing’s board also deserves scrutiny …”

Boeing Today

Boeing CEO Dave Calhoun

What that Fortune story failed to mention was that Calhoun and the board are going to have another chance to fix Boeing. Calhoun was promoted from within the board (he’d joined in 2009) after then-CEO Denis Muilenburg was shown the door four years ago following the two crashes of 737 Max aircraft in 2018 and 2019. In both of the crashes, the software in the 737’s Maneuvering Characteristics Augmentation System (MCAS) went rogue in flight and shoved the nose of each aircraft down until they were unrecoverable. As it turned out, another flaw in the MCAS was that no 737 Max pilots were ever told of its existence, nor were they trained on how to recover if things went haywire. Those crashes claimed the lives of 346 men, women, and children. Not long after, the Max fleet was grounded around the world for 20 months, the longest in any airliner’s history.

Calhoun was supposed to give Boeing a fresh start following those tragedies, but that strategy was flawed from the get-go. Calhoun, a former GE executive believed strongly in the idea of increasing shareholder value as the primary direction for Boeing to point its compass.

To its credit, Boeing did add several new members to the board of directors, some with industry engineering experience on their resumes following the chaos of 2019. None of the men and women appointed to the board were line-hardened engineers, however, the kind of people who could bring real Boeing manufacturing experience to the table.

NTSB published a photo highlighting the areas of missing hardware on the Alaska Airlines aircraft.

Earlier this week the NTSB released the preliminary report of last month’s Alaska Airlines incident. The report included proof, with photos, that Boeing remains a company embroiled in manufacturing chaos. After repairs in Seattle, the door plug of the Alaska Airlines aircraft was reinstalled, but minus the hardware needed to hold it in place. Loose hardware was also discovered on other Alaska and some United Airlines aircraft following the incident. Again, it’s only luck that kept Boeing out of hot water surrounding another fatal accident.

Things Seem to Just Keep Getting Worse

The past month has been ripe with accounts of faulty manufacturing processes from several people claiming to be Boeing employees. Last Sunday, Boeing’s Commercial Aircraft president Stan Deal said in a statement that all manufacturing personnel would be taking a bit of a breather to reexamine the company’s quality processes. This came as he admitted, “a supplier notified us of a nonconformance in some 737 fuselages.” Because of that Boeing is holding on to an additional 50 fuselages to determine why several holes were incorrectly drilled. Boeing’s statement continued, “While this issue could delay some near-term 737 deliveries, this is the only course of action given our commitment to deliver perfect airplanes every time.” Additionally, “737 program employees submitted more than 1,000 improvement ideas during the [recent] Quality Stand Down” that idled the factory floors. “Elizabeth Lund and her team have been sorting through the feedback and prioritizing the ideas that can and should be implemented right away.” One that caught my eye was “The 737 program has set up a team to expedite the purchase of new tools so that all of our teams have the necessary equipment to perform installation work.” The right tool for the right job … what a pretty unique idea.

Where’s the FAA on All of This?

Whether the FAA can be of help at this point is unknown. The agency claimed they’d increase oversight of Boeing after the crashes in 2018 and 19, so we’ve heard these promises before. But we need to give the new FAA administrator Michael Whitaker a chance. He’s only been planted behind his desk in DC for about 4 months. A rather ironic topic the new administrator should find interesting is that Boeing updated the charter of its safety committee just weeks before the Alaska Airlines incident. Pay close attention to the committee’s purpose.

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The problems at America’s largest aircraft builder date back a few decades to the change in business strategies that prioritized profits, cost-cutting, and increasing shareholder value above product quality. The board obviously knew there were manufacturing and design problems … at least as far back as 2018. Only now, when the board has their backs to the wall is the management team forced to admit their weaknesses. And we only know about the Alaska incident because the door plug fell off the aircraft. About now everyone is wondering what other parts of the 737 are lining up to fail. Of course, the board is another matter altogether.

Boeing’s Board of Directors

It’s high time that Boeing shareholders rise up and demand the board be remade into a working group that operates with a quality mandate rather than simply talking about fixing things. In fact, a number of shareholders have recently sued Boeing.  A better board of directors should appoint some senior rank-and-file IAM members to keep an eye on the bean counters. The timing might be just right too since Boeing and the IAM will soon square off to open new contract negotiations next month. You can just bet the machinists haven’t forgotten the company’s preeminent cost-cutting efforts, like when Boeing built that new 787 plant in South Carolina just to avoid dealing with the union.

It’s also high time someone showed Mr. Calhoun and his lackeys the door. If they were able to fix what was wrong at the company, they had a chance to get moving more than five years after Lion Air 610 fell out of the sky. What we got instead was a door plug falling out of a fuselage at 15,000 feet. But maybe this time, any pink slips for the upper echelon won’t include huge severance packages like the $62 million they gave Denis Muilenburg when they fired him.

But I’m also thinking maybe Boeing needs a catchy marketing slogan to coincide with the revamp long before the company ever needs to file for Chapter 11. Hey Boeing, the folks at the old Zenith Electronics company had a pretty good one. “The quality goes in before the name goes on.”

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