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Boeing CEO faces biggest crisis yet as fatal crash grounds jets

Mar 11 2019 13:56
Bloomberg News

Boeing Chief Executive Officer Dennis Muilenburg faces his biggest crisis yet following the second deadly crash of a 737 Max airliner, prompting airlines to ground the best-selling narrow-body and threatening to end Boeing’s three-year stock rally.

China ordered its carriers to ground all 96 of Boeing’s newest 737 model, while Indonesia said it would also halt flights after Ethiopian Airlines Flight 302 went down in a field shortly after takeoff Sunday, killing all 157 people on board. While the flight recorders still have to be analysed, the disaster bore similarities to the doomed Lion Air 737 Max that also crashed in October.

The 737 Max is Boeing’s most important aircraft type, generating almost one-third of the company’s operating profit and forming the backbone of many global airline fleets who use the model and Airbus’s competing A320 family on shorter routes.

Boeing sank 8.6% to $386 in early US trading. That would mark the biggest drop since January 2016, and pose a threat to the rally under Muilenburg, who has overseen a tripling in the shares since taking over at the biggest US exporter.

“Boeing has lost control of the timetable to provide the safe, reliable solution,” said Neil Hansford, chairman of the Australian consultancy firm Strategic Aviation Solutions. “The longer it goes, the more chance Boeing has of losing orders.”

The grounding in China, followed by the Indonesian air safety regulator’s order to halt 737 Max flights from Tuesday, raises the specter of other countries following suit. South Korea began a special inspection of the aircraft, while in Europe, regulators said they’re in contact with their US counterparts as well as Boeing, but that it’s too soon to take action.

Investigators have recovered the cockpit voice and flight-data recorders, Ethiopian Airlines said on Monday, a significant step forward in piecing together what happened.

Chinese airlines accounted for about 20% of 737 Max deliveries worldwide through January, and further purchases of the Chicago-based planemaker’s aircraft are said to have been touted as a possible component of a trade deal with the US.

Lion Air, which is based in Indonesia, is one of the biggest customers, having ordered 201 Max planes and taken delivery of 14.

The single-aisle 737 Max is poised to generate about $30 billion in annual revenue as factory output rises to a 57-jet monthly pace this year, according to Bloomberg Intelligence estimates.

The disaster in Ethiopia followed the crash of Lion Air’s 737 Max off the coast of Indonesia on October 29. A preliminary report into that flight indicated that pilots struggled to maintain control following an equipment malfunction. The US Federal Aviation Administration is working with Boeing on a possible software change to reduce the chances that such a failure could cause an accident in the future.

Boeing responded to the earlier crash by advising pilots that the Max’s so-called angle-of-attack sensor can provide false readings, causing the plane’s computers to erroneously detect a mid-flight stall in airflow. That in turn can cause the aircraft to abruptly dive to regain the speed the computer has calculated it needs to keep flying. Pilots could counteract the sudden downward tilt by following a checklist in their training manual, the planemaker said.

“The B737 Max design is dangerously flawed,” said Mohan Ranganathan, a former commercial pilot and an aviation safety consultant based in the southern India city of Chennai. "There is a definite similarity between Lion Air and Ethiopian Airlines Max crashes.”

The doomed Ethiopian jetliner left Addis Ababa at 08:38 local time, and contact was lost six minutes later, the company said in a statement. There were people from 35 nations on board, including 32 Kenyans, 18 Canadians, nine Ethiopians and eight Americans. The United Nations, which is hosting an environmental conference this week in Nairobi, said it lost 19 staff members in the crash.

The pilot of the ET302 reported problems shortly after takeoff and was cleared to return to the airport, said the airline’s chief executive officer, Tewolde GebreMariam. The 737 Max 8 hadn’t had any apparent mechanical issues on an earlier flight from Johannesburg, he said.

Ethiopian Airlines had five of the planes in operation as of the end of January and orders for a further 25, according to Boeing’s website. Boeing has dispatched a technical team to assist the investigation into the Ethiopian Airlines plane, which was delivered new in November to Africa’s biggest carrier, while the FAA, which originally certified the 737 Max and US National Transportation Safety Board have also joined the probe.

Jet Airways India and SpiceJet, two Indian airlines that use the 737 Max jet, and the country’s regulators have asked Boeing for information following the Ethiopia crash.

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