“Experts say that the root of Boeing’s present troubles is a longstanding culture issue. Over the years, the company’s top decision-makers went from detail-oriented engineers to slick suits with MBAs.
“You’ve got a management team that doesn’t seem terribly concerned with their core business in building aircraft,” says Aboulafia.
There’s one name that keeps popping up when people talk about Boeing’s cultural downslide: Jack Welch, the legendary — and infamous — executive who helmed the conglomerate General Electric from 1981 to 2001. Welch was known for ushering in a sea change of “lean” management that ruthlessly made cuts in both manufacturing processes and the workforce, all in the service of pumping up stock prices. His leadership style included firing the worst-performing 10 percent of GE staff every year; he reportedly laid off over 250,000 people during his tenure. He inspired an entire generation of business leaders, and this Welchian GE philosophy was eventually brought over to Boeing.
Historically, Boeing was renowned for its boundary-pushing innovations in aviation, which helped put commercial air travel on the map. But in 1997, Boeing bought a rival plane maker called McDonnell Douglas; instead of Boeing culture influencing McDonnell, however, the opposite happened. The engineer-focused company got a heavy dose of the cutthroat GE ethos as McDonnell’s CEO — a Welch disciple — became the president and chief operating officer, and later CEO, of the merged company. Other Boeing leaders, including James McNerney and current CEO David Calhoun, have also had stints at GE.
In Flying Blind: The 737 MAX Tragedy and the Fall of Boeing, journalist Peter Robison describes an environment where safety concerns were concealed or downplayed, in part to be faster and cheaper than Airbus, the former underdog that overtook Boeing as the biggest commercial aircraft manufacturer in the world in 2019.
The company began relying more on subcontractors; It had its own fuselage plant until 2005, when it sold it to a private equity firm — that entity became Spirit AeroSystems. Today, Boeing only completes the final assembly of a plane after it sources parts from thousands of suppliers. Outsourcing is cheaper — but using so many suppliers reduces the fine-tune control and oversight a company has over the parts that make up their product, according to aviation experts.
While lean management was the name of the game for Boeing’s rank-and-file, in the past decade the company’s executives spent over $43 billion buying back their own stocks and paying out nearly $22 billion in profits to shareholders. By buying back shares and removing them from the public market, the individual value of a share automatically rises even though nothing about the company’s operations has changed.
Those billions represent cash that could have been reinvested in developing the next line of Boeing planes or hiring more quality inspectors. Former Boeing CEO Dennis Muilenburg, who led the company during the deadly Max crashes, reportedly received an exit package of $62 million.
After the merger, there was also “an open labor war between the unions and the management,” says Hamilton.
In 2000, feeling demoralized and disrespected by the leadership shift, over 22,000 Boeing engineers went on strike. One of the chants heard during the strike: “No nerds, no birds.” As in, if Boeing doesn’t let engineers do their jobs properly, with adequate pay, there would be no airplanes. The engineers got the extra money they asked for, but not the ideological win. Boeing bled about $750 million due to the strike, according to Robison, and kept on with its cost-cutting drive while Boeing’s workers have kept sounding the alarm with every mass layoff.
In 2019, the company said it could cut as many as 900 inspectors — the people who make sure the plane is ready to fly. In 2020, it laid off about 16,000 people. Some were offered buyouts, a move that the company might have regretted when it had to go on a hiring spree after the pandemic, and after the 737 Max was cleared to fly again. “So you have a lot of inexperienced workers who now have their hands on the airplane rather than the mature, highly experienced workers who were laid off or took early retirement,” says Hamilton.
Despite the regular rounds of mass layoffs, last summer, Boeing’s CEO Dave Calhoun said he would love to ramp up the production of 737 planes from 50 to 60 per month, which would further elevate the pace of work for Boeing workers who already felt pressured to meet unrealistic quotas. A 2019 New York Times report interviewed over a dozen people about their experience working at Boeing, who said they saw many safety hazards during assembly — like debris left on planes — and claimed that they were fired for raising potential problems.
Boeing’s treatment of its 10,000-plus subcontractors has come under scrutiny, too, as the company has demanded ever-lower prices. “They treated their suppliers the way they treated their workers — as a disposable commodity,” says Aboulafia.
Boeing’s strategy to continually shrink costs doesn’t appear to have paid off. The company hasn’t turned an annual profit in the past five years. Airbus is selling more planes, and recent headlines about Boeing are putting a halo over Airbus’s comparative reputation. In January alone, Boeing lost $35 billion in market value as its stock price fell.”
“Argentina’s new, libertarian President Javier Milei announced a so-called “open skies” initiative that will scrap many of the regulations prohibiting foreign airlines from operating flights between Argentinian cities. Combined with the abolition of government price controls on airfares, the new rules will allow foreign airlines to directly compete with Aerolineas Argentinas, the national airline that has managed to lose an estimated $8 billion since 2008 despite having a monopoly on domestic flights.
America, thankfully, does not have a government-owned monopoly responsible for domestic air travel. However, the federal government does prohibit foreign airlines from operating flights between American cities. That means Americans have only a few choices when it comes to flying domestically—and on some less commonly traveled routes, maybe no choice at all.
Those restrictions on “cabotage” by foreign-owned and -operated airlines are naked protectionism for the shrinking number of American-based airlines. As always, consumers pay the price—and could reap the benefits of greater competition.
A 2020 paper by researchers at the Brookings Institution, Bayes Data Intelligence, and Washington State University, for example, found that American travelers would realize $1.6 billion in annual benefits from the entry of just one foreign airline into the U.S. market.
Some of those benefits would be rather straightforward: lower prices created by greater competition. But other benefits would likely materialize too. If given the chance to expand their operations into the United States, low-cost European airlines like Ryanair could bring their innovative business models to this side of the Atlantic.
Indeed, as the Cato Institute’s Scott Lincicome pointed out in a post for The Dispatch last year, the elimination of national monopolies and cabotage regulations in Europe during the 1990s has produced a flourishing market that includes legacy brands (like Air France and Lufthansa) along startups like Ryanair, WOW, and others.
The result: “These airlines have low prices, lots of fans, and (unsurprisingly) tons of capacity,” Lincicome wrote. In the United States, a similar arrangement could lead to “lower fares, more routes/capacity, more jobs—and no federal subsidies or brute force needed.””
“Rather than add to the complexity of domestic fare pricing with the threat of compelled cash payments, wouldn’t U.S. air travelers benefit more from having a wider array of airlines to choose among?
Given the authorization to do so, top global performers such as Singapore Airlines, the Dubai-based Emirates, Japan’s All Nippon Airways, and Australia’s Qantas could enter the U.S. market to challenge American legacy carriers on the high-revenue routes that link dynamic American regions.”
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“At the other end of the market, budget carriers such as Ireland’s Ryanair, Britain’s EasyJet, and Malaysia’s AirAsia provide no-frills travel that could put downward pressure on economy-class fares within the U.S. and give travelers more choice and market power.”
“These are the sorts of proposals that sound good in theory—who wouldn’t want to pay less in junk fees? But some of these fees exist for good reasons. (Late fees, for instance, encourage people to pay their bills on time, which is good for both credit card companies and for users, who will otherwise rack up more interest to pay back.) And in any event, companies aren’t simply going to say, “OK, we’ll just make less money.”
Hotels may respond by raising base room rates or charging new fees for typical amenities. Airlines that can’t charge for choosing your seat may raise base ticket prices, baggage fees, or other costs. Banks that can’t fine people for overdrawing their accounts may raise rates for opening an account, require higher minimum balances, or deny more people bank accounts to begin with. Credit card companies that can’t charge late fees may deny more lines of credit or charge higher interest rates. And so on.
All the Biden administration is really doing is shifting people’s costs around.”
“massive flight cancelations from are a good reminder of what a raw deal those bailouts were for taxpayers and consumers. Rather than allow the shock of the pandemic to create some needed disruption in the passenger airline industry, Congress chose to prop up a messy status quo.
The $7 billion Southwest received from three COVID relief bills allowed ineffective practices at the airline to persist. Allowing the competitive pressures to more freely do their work might have spurred some productive change within Southwest.”
“”Data on overall traffic trends supports the notion that the average flier has not been negatively affected by consolidation,” the Eno Center for Transportation, a research nonprofit, found in 2017. “As the industry has consolidated and grown throughout the decades, the number of seats that are available for passenger use—available seat miles—has increased multiple times over. By some measures, the cost of domestic air travel has remained level since 2006, adjusting for inflation.”
However, there is some evidence that certain mergers have led to price increases. As a 2016 data analysis by travel writer JT Genter found, “On average, airfares between former Delta and Northwest hubs increased substantially—much more than the national average—demonstrating that the Delta-Northwest merger wasn’t good for hub-based flyers.” Genter continued, “However, airfares between United and Continental hubs have seen much more modest increases over the last five years, and the fares have actually decreased on average over the last four years.”
Current evidence, though not uniformly supportive of all mergers, points toward them being generally good for consumers. Larger airlines tend to mean more flights at similar or lower prices—especially when traveling through hubs. Even when evidence points to some mergers resulting in price hikes for consumers, Warren and Padilla’s assertions that airline consolidation “routinely heaps inconvenience and abuse on consumers” are exaggerated.”
“the idea of supersonic flight is appealing because it’s extremely fast and would shave hours off of transoceanic flights. That’s not to mention that it would be pretty cool to travel faster than the speed of sound.”https://www.vox.com/recode/22508975/united-supersonic-plane-concorde-boom-hermeus-virgin-nasa