How would you like to be in charge of operations at Boeing? There are forecasting problems, capacity issues, quality failures, and supply chain snarls. The result: Boeing’s commercial airplanes unit delivered an operating loss of $472 million in the quarter, says The Wall Street Journal (July 28, 2021).
This follows two all-consuming crises. Its MAX jets had been grounded for nearly two years after two fatal crashes that took 346 lives, and the pandemic had sapped demand for new airplanes as passengers stayed home and airlines retrenched. The company has also grappled with production-quality problems on its 787 Dreamliner. Global airline capacity remains 30% below pre-pandemic levels and industry executives expect it to take until 2024 to catch up.
U.S. aerospace companies last year announced plans to shed more than 100,000 jobs, including many at Boeing’s 12,000 suppliers. Boeing itself has plans to cut its own workforce by almost 1/5 to around 140,000 by the end of this year. While the return of the 737 MAX has bolstered sales and cash, Boeing has recently slowed Dreamliner production while it addresses new issues with the planes. The company has delayed deliveries to fix defects that emerged about a year ago and is awaiting regulatory approval for a plan to inspect aircraft. With customers unwilling or unable to receive deliveries of their new 787s, Boeing has 50 undelivered widebodies scattered around its facilities and is running out of space to park them.
The new 787 problem surfaced on the forward pressure bulkhead at the front of the plane. It involves the skin of the aircraft and is similar to a previously disclosed Dreamliner issue found elsewhere on the planes. Engineers at Boeing and the FAA are trying to understand the defect’s potential to cause premature fatigue on a key part of the aircraft’s structure.
Further, the firm needs orders from China to participate fully in a stronger-than-expected recovery in air travel. Boeing hasn’t secured a direct new jetliner order from China in almost 4 years, and has been pushing for improved trade relations with the U.S. Boeing’s payroll depends on U.S.-China trade relations, says its CEO.
Classroom discussion questions:
- How can Boeing forecast jet sales in the coming years? What techniques in Chapter 4 of your Heizer/Render/Munson text are applicable?
- Why is Boeing facing continuing quality problems?