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What Can We Learn From the Business Decisions

That Created Boeing's Troubled 737 Max Airliner?. A chain of decisions resulted in the design of Boeing's newest 737 line, which has been plagued with mishaps and defects. There are some serious missteps your company could easily avoid.

By Inc.Arabia Staff
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Boeing's 737 Max is in the headlines again, thanks to a terrifying incident last week when a large door panel tore off an Alaska Airlines 737 Max 9 airliner midflight.

This was merely the latest setback for Boeing, whose Max aircraft line has been plagued with problems for many years. 

So why did Boeing's management choose to take an aircraft that first flew in April 1967 and update its design, rather than create a wholly new, high-tech airliner? 

The Frankenplane 

Designing and building airliners is an incredibly complex and expensive process. It's analogous to the challenges that many startups face, but on a billion-dollar scale--which puts heavy pressure on management decisions at every step.

Boeing created the 737 Max at least in part because of the famous "sunk costs fallacy." In 2020, Boeing's big rival Airbus was seeing success with its A320neo--a small, high-tech, highly efficient airliner designed with 21st-century fuel costs, economics, and environmental issues in mind. To compete with the new model, Boeing needed its own new aircraft. Management faced a choice: They could either design and build a new airplane or revamp an older, existing model. 

But Boeing's attempts to design an all-new, ultra-modern airliner were troubled. Its new, larger 787 Dreamliner model was delayed, expensive, and bedeviled with technical issues.

Boeing was also said to be under pressure from some of its customers to consider their own operating costs. For an all-new airline design, pilots would have to go through time-consuming, expensive training. Updating the training for a refreshed design of an existing aircraft would be cheaper and simpler. Airline maintenance costs would also be lower for an update than a new airplane, with ground teams using familiar, older equipment.

When American Airlines, a longtime exclusive Boeing customer through the early 2000s, was said to be considering ordering Airbus aircraft (in a deal that ultimately closed in 2011), Boeing's leadership chose the safer, faster, and more cost-efficient path. Or so it hoped. 

Cue the Frankenplane: the 737 Max airliner. The technology and design core of this new aircraft line was firmly based on the first 737 from the 1960s. But those elements were mixed with updated technology, in an attempt to meet the industry's current efficiency needs. Various 737 Max configurations are offered by Boeing, from the smaller Max 7, which can carry about 150 passengers, through the bigger Max 8 and largest Max 9 aircraft--which can carry well over 200 passengers, but over a slightly shorter distance.

This design conundrum of the 737 Max aircraft played a role in two infamous crashes of 737 Max 7's within a few years of the Max line's introduction. The ultra-modern engines were larger than the old-fashioned 737 design could fit, meaning they had to be placed forward of the wings. This made the aircraft potentially unstable in flight, and required a new system in the cockpit called MCAS to keep them flying safely. MCAS problems, including a serious misunderstanding of the system by some pilots, played a role in the downing of two flights, in Indonesia in 2018 and Ethiopia in 2019, leading to a global grounding of the entire 737 Max fleet.

Management choices, good and bad

Managing a company is difficult, no matter its size. But some of Boeing's key leadership decisions around the Max design process are stunning examples of what not to do as business leaders. These lessons apply even if your company has five staff instead of many thousands. 

For example, in the aftermath of the two 737 Max 7 crashes, Boeing leadership attempted to deflect some blame onto the pilots for not following the right procedures. But Southwest Airlines and the FAA accused Boeing of deactivating a safety feature that would have told pilots a key part of the MCAS system wasn't working, and the company hadn't properly explained this.

The 737 Max crashes have cost Boeing dearly: A nearly $5 billion deal with Garuda Indonesia was soon canceled by the airline, which lost confidence in the design. The latest issues appear tied to potential quality control lapses during the production of newer, longer Max 9 fuselages. In particular, fittings of a "plug door" of the type that tore off the Alaska Airlines flight. Other airlines have now reported loose bolts in the same places. It seems that management hasn't ironed out the quality problem--accusations from Emirates airline executives suggest Boeing's construction line quality control has been a problem for a long time.

At least Boeing's leadership is, in public, taking some responsibility for its role in the latest accident. At an all-hands meeting yesterday, CEO Dave Calhoun told employees that Boeing needs to admit its mistakes. He made matters personal: "I've got kids, I've got grandkids, and so do you. This stuff matters. Every detail matters." That's good advice, and holds whether your company makes apps that a few thousand people use, or aircraft that carry millions of people through the air every single day.

Photo Credit: Getty Images.

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