Boeing Blues

“If it’s not Boeing, I’m not going.”

Boeing 737max on final approach. Source: Wikimedia

That’s how lots of pilots often spoke of Boeing’s airframes. These were built around the flight crew’s needs, giving the pilot and co-pilot as much control as possible. Pilots, like most people, like to feel that they’re in charge. The 737 airframe has been a workhorse in the air travel system ever since its introduction in 1967. It has been in continuous production, with over 10,000 planes built and 4,600 in service. There are over 4,700 737s currently on order.

By contrast, rival Airbus has always structured a more automated cockpit. Airbus delivered its first A320 in 1984, and has a backorder of more than 6,000 aircraft. In 2010, with fuel prices soaring and passenger travel just recovering from the global recession, Airbus announced the A320neo, a “new engine option.” The updated airframe would use larger, more efficient turbofan engines. Boeing, at first dismissive of its rival, became quite concerned when the CEO of American Airlines, Gerard Arpey, informed Boeing’s chief James McNerney that they were close to making a new order for over 200 jets – comprised exclusively of A320s.

McNerney responded and told Arpey that Boeing would develop and deliver an updated 737, a new model that incorporated more efficient technology. Most importantly, it would fly like a 737, the tried-and-true model that flight crews loved. This also would speed development and delivery, an issue because Boeing’s new 787 Dreamliner had suffered significant delays. Only six months later, engineers were documenting differences between the new MAX and its predecessor – a very fast turnaround. Of paramount concern was that the airplane should fly almost identically to the previous models. But there was a problem. The more efficient engines were much larger than earlier models. They had to be mounted higher and further forward on the wings. This changed the airplane’s flight characteristics and might require significant flight-simulator training for new flight crews. Uh oh.

Leap 1B engine on 737 MAX. Photo: Clemens Vasters. Source: Wikimedia

So Boeing did something unusual. They fixed their flight profile with software. They added sensors and an automated trim system to make the airplane feel the same in flight as it did before, even though the new engines generated lift and thrust with a different aerodynamic profile. Remember the essay about how “Software Eats the World”? The author, venture capitalist Marc Andresson, didn’t cite aircraft makers in his ode to software, but he did note how airlines, cars, and other industries increasingly need sophisticated code to manage their products and processes. The MAX software did the trick, speeding development and delivery time, and reducing the need for training. Orders for the MAX soared.

Source: Wikipedia, Boeing

It should be no surprise, however, that something unexpected happened. When one of the sensors in the 737 MAX failed, the software failed to detect and compensate for the error. The flight crews were perhaps unprepared for a computer problem in a Boeing model. Although this airframe has completed over 40,000 flights without incident since first entering commercial service two years ago, two tragedies in five months have led aviation authorities around the world to ground the model pending investigation. US authorities are also looking into the certification process.

In the past few decades our expectations for air travel have changed dramatically. There hasn’t been a commercial airline crash in the US since a commuter flight went down in a snowstorm over Buffalo, New York in 2009. This is an amazing safety record. It shocks people, then, when they hear about crashes due to equipment or software failures.

Boeing is a great company with an outstanding legacy and dedicated workers, and they’ll recover from this. But they’ll have to convince regulators, the airlines, and the public that they can be trusted, that competition hasn’t led to shortcuts. Because when it comes to air travel, safety is no accident.

Douglas R. Tengdin, CFA

Charter Trust Company

“The Best Trust Company in New England”

By |2019-04-02T16:33:52-04:00April 2nd, 2019|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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