Boeing Faces Tricky Balance Between Safety and Financial Performance

Less than four weeks after a hole blew open on a Boeing 737 Max 9 jet during a flight, company executives face a thorny question: Should they emphasize safety or financial performance?

The issue is looming as Boeing prepares to report its fourth-quarter earnings on Wednesday amid its most significant safety crisis in years. With the Jan. 5 incident on a Max 9 flight still under investigation, executives are grappling with how much to discuss quality control while also reassuring shareholders that the company is protecting their investment, according to two people with knowledge of the matter.

The National Transportation Safety Board is expected to release a preliminary report this week on the incident, which occurred on an Alaska Airlines flight. The report could shed more light on how a panel blew off the Max 9 and will almost certainly ramp up scrutiny of Boeing by lawmakers, airlines and safety groups.

Dave Calhoun, Boeing’s chief executive, is expected to speak about safety during the company’s call with investors on Wednesday morning after the release of its earnings report, one of the people said. But it is not clear what balance he and other executives will strike in their comments as they try to contain the fallout from the Max 9 incident.

The subject has taken on new significance after news accounts, including a report in The New York Times, that Boeing workers opened and then reinstalled the panel, known as a door plug. The plug tore away from the Alaska plane shortly after takeoff. That revelation suggests that the incident — which terrified passengers and forced the pilots to make an emergency landing — may have been caused by lapses at a Boeing factory in Renton, Wash.

Some aviation experts and executives have long said that Boeing’s safety problems and its financial performance are intertwined. The company, these people say, has for many years put too much emphasis on increasing profits and enriching shareholders with dividends and share buybacks, and not enough on investing in engineering and safety.

Boeing’s emphasis on rewarding investors has led to quality and safety problems, its critics say, including two deadly crashes on the 737 Max 8 plane in 2018 and 2019 that killed nearly 350 people. Those accidents and the effects of the coronavirus pandemic have, in turn, hurt Boeing financially and allowed its main rival, Airbus, to surge ahead of it in sales.

“Lately, Boeing appoints C.E.O.s that seem more focused on stock price and dividends than on flight safety and production quality,” said Dennis Tajer, a captain at American Airlines and a spokesman for the union that represents the airline’s pilots.

Boeing declined to comment.

How Boeing navigates its latest crisis in the coming weeks and months could have broad implications for its credibility with regulators, airlines and travelers, as well as its long-term financial performance.

Investors are worried that this latest crisis could set back Mr. Calhoun’s plans to put Boeing on more solid financial footing. The company’s stock price has fallen about 19 percent since Jan. 5.

Airline executives, federal regulators and safety groups have expressed increasing frustration with Boeing and its repeated safety problems.

Mr. Calhoun, who took over as chief executive in January 2020 after serving on the company’s board for years, vowed then that the company would “be better” and would hold “ourselves accountable to the highest standards of safety and quality.”

Robert Isom, the chief executive of American Airlines, told Wall Street analysts last week that “Boeing needs to get their act together.” He added, “The issues that they’ve been dealing with over the recent period of time, but also going back a number of years now, is unacceptable.”

Adding to the sense of urgency for Boeing, the Federal Aviation Administration said last week that it was limiting Boeing’s ability to increase production of all 737 Max planes, including approving any additional assembly lines, until the company proves that it has resolved its quality control issues.

The agency has allowed Max 9 planes that it had grounded after the Alaska incident to resume flying after inspections. United Airlines and Alaska, the only two U.S. airlines that fly the Max 9, in recent days have started using the planes again.

Federal investigators are focused in part on whether the two pairs of bolts that were supposed to hold the door plug in place on the plane’s body were installed. No bolts have been recovered.

The circumstances of the Alaska Airlines incident are different from those in the Max 8 crashes: no serious injuries were reported, and the issue appears to involve manufacturing rather than design. But Boeing’s approach to its quarterly earnings report in April 2019, just weeks after the second Max crash, may serve as a template for Boeing executives on Wednesday.

During that earnings call, Dennis Muilenburg, then the company’s chief executive, spent several minutes speaking about safety and quality, rather than Boeing’s financial performance.

“Recent events have been a deep reminder of the importance of our enduring values at Boeing: safety, quality and integrity, even more so in the difficult times we face now,” Mr. Muilenburg said at the beginning of the call. “Our work demands the utmost excellence.”

Analysts expect that Boeing will seek to reassure stakeholders about its commitment to safety.

“In our view, investors are a secondary audience for Wednesday’s call, as regulators, members of Congress and their staffs, and the press and the public are all key constituencies for Boeing to address, with the focus likely to be on processes for insuring safety and quality,” analysts for J.P. Morgan wrote in a note on Monday.

Mr. Calhoun has suggested that he is not concentrating on Boeing’s financial performance at the moment.

“This is not the time to be talking about what I can or can’t hit with respect to deliveries,” he said in an interview on CNBC on Jan. 10, in response to a question about ramping up production of the Max planes. “My job right now is solely focused on, let’s get the safety issue understood and fixed.”

Peter Eavis contributed reporting.

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