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David Brown
Wondery subscribers can binge all four episodes of Business the Unraveling of Boeing early and ad free right now. Join Wondery plus in the Wondery app or on Apple Podcasts. It's January 2020 and Dave Calhoun has flown into the Pacific Northwest on a rescue mission. Last month, as the 737 Max crisis deepened, Calhoun and Boeing's board fired CEO Dennis Muilenburg. Now Calhoun is the new CEO and tasked with pulling the business out of its tailspin. The 737 Max has been grounded for 11 months. Now. Boeing is nursing losses of $7 billion. Its borrowing costs are higher because its credit rating's been downgraded, and the company doesn't expect the FAA will let the MAX fly again until mid year at the earliest. But while in the new role, Calhoun's not new to Boeing. He's spent the past decade on its board, a position that's given him a ringside seat to many of the decisions that led the company to this point. But now, at the headquarters of Boeing's commercial airplane division in Renton, Washington, he's looking to rebuild trust. In a conference room with views of the overcast skies outside, the 62 year old Calhoun Fields questions from journalists on a teleconference. I believe this culture is a good one. Employees at Boeing care about safety, but their confidence right now is shaken. My job is to restore it. Journalists question why the MAX managed to reach the market with deadly flaws in its flight control system. Calhoun says the problem isn't one of Boeing prizing savings over safety. It's due to assumptions about how pilots would react to problems during a flight, assumptions that proved fatally wrong. It's a judgment everybody wishes they hadn't made. But the media isn't the only audience. He hopes to win the trust of today. He also needs to reassure thousands of Boeing employees. So after an hour of talking to the media, he gives a webcast to the people who work in Boeing's commercial aviation division. He knows many of them are on edge about whether they'll keep their jobs. Just before Christmas, Boeing halted production of the 737 Max. I want to reassure you that we have ruled out layoffs at the MAX assembly plant. The MAX is here to stay. I'm confident that eventually it will catch up with the Airbus A320neo. We'll win one pilot at a time. I believe in this airplane. But belief won't be enough to get the MAX off the ground. And the crisis is far from over. In fact, it's about to get Worse, as a combo of groundings, canceled aircraft orders and Covid strain Boeing's finances to the max. You know, your team spends over half their time writing, and we all know how that happens. One confusing email turns into 12 confused replies and a meeting to get all lined up again. 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It's late January 2020 and Boeing's head of government operations, Tim Keating, just arrived at the headquarters of Ethiopian Airlines in Addis Ababa. And he's here on a delicate assignment. The one year anniversary of the crash of Ethiopian Airlines Flight 302 is approaching and a memorial ceremony for the families is planned to mark the tragedy. Boeing's agreed to pay for it, but Keating's here to ensure this anniversary doesn't reignite the fires of negative publicity. The Ethiopian Airlines team leads him into a conference room with brightly painted sea green walls. Inside, relatives and representatives of those who died on the flight are waiting. Their conversation stops as he arrives. Boeing has pledged to spend $100 million supporting the families. But to them, it's the manufacturer of the aircraft that killed their loved ones, and Keating embodies that company. They eye him warily, wondering how Boeing hopes to stage manage their moment of commemoration in return for its money. Keating opens by promising that Boeing wishes to do all it can to support this event and make it meaningful for them. But there are restrictions. Boeing will cover each family's hotel and food for three nights. The anniversary takes place on a Tuesday, and everyone must fly out on the Sunday beforehand and leave Wednesday. There will be a limit of two representatives of each family. The relatives object. Can those flying long distances come on Saturday to adjust to the jet lag? What if divorced parents both want to come? Or siblings? Do they get one or two hotel rooms? One relative asks to bring a therapist. Keating says Boeing has hired a company to provide therapists on site. A request to bring someone along to video the event is also denied. Boeing has that covered. What about journalists? No journalists. Several families say they don't want any Boeing representatives present for the eulogies. Keating looks surprised, then denies that request, telling the families, if we're paying for it, we'll be there. After further objections, Boeing relents and agrees to stay away. But to the families, it's clear that Boeing wants tight control over access to the memorial and how much money is spent on it. It's here for the families, but it's also got one eye fixed firmly on the cost and projecting the right public image. While Keating fine tunes the anniversary memorial, back at Boeing head office in Chicago, CEO Dave Calhoun is trying to repair the company's battered reputation. Its latest PR disaster is the outrage over the internal Boeing communications made public by the investigation into what went wrong with the 737 Max. In these emails and instant messages, Mark Forkner, the former chief technical pilot for the max, and his then colleagues at Boeing celebrate Jedi mind tricking aviation regulators. They also discuss problems with mcas, the software system behind the crashes. Now a grand jury is investigating whether Forkner intentionally misled the Federal Aviation Administration. Several employees have already been questioned. Then in January, the company released more internal communications. In these, Boeing employees talk of the MAX as an airplane designed by clowns who are supervised by monkeys. In another message, an employee asks, would you put your family on a max? Simulator trained aircraft. I wouldn't. After the latest revelations, Calhoun told reporters that these messages were appalling and part of a micro culture that is out of step with the wider company. He promised action. So now Boeing's cleaning house. In February 2023 Boeing pilots who were part of Forkner's exchanges are called to their manager's office. On arrival, they are read a pre prepared statement informing them that they're now on administrative leave. Meanwhile, Forkner's lawyer issues a statement saying his client denies there was an attempt to mislead the regulator, adding that the messages have been taken out of context and that Forkner believes the Max is a safe aircraft. While Forkner thinks the plane is safe. The world's regulators aren't so sure. The Max has spent the year since the Ethiopian Airlines crash grounded by regulators worldwide. Yet Boeing feels confident that the Max will soon return to the skies. Work on the long promised MCAS fix is in its final stretch. But then COVID 19 strikes. With 100,000 employees nationwide, Boeing is America's largest manufacturer. Its activities also support millions of other jobs at airplane suppliers who do everything from making fuselages to weaving floor carpet. And the impact of COVID on all of that is severe. The stay at home orders grind air travel to a halt. Boeing stock nosedives. In five days, its stock loses more than 40% of its value. It raises the possibility that Boeing will now need government support. And President Donald Trump stands ready to deliver that taxpayer payer bailout if necessary. One more question. You didn't have one, did you? Come on. Will the US Government provide financial assistance to Boeing and airplane suppliers like ge? We're looking at that. We're certainly looking at Boeing. Boeing got hit hard in many different ways. Boeing never had a problem for, for years. They were, they were an incredible. And they were. It was unthinkable what happened with respect to Boeing. Unthinkable, probably. I would consider it the greatest company in the world prior to a year ago. Now they get hit in 15 different ways and they have different management. I've met the new people running Boeing. I think it's going to be outstanding. But yeah, we have to protect Boeing. We have to absolutely help. Help Boeing. By June 2020, Covid has brought commercial aviation to the brink of disaster. Within the US alone, air travel is down almost 90%. Countries the world over are shutting their borders to stop the virus from spreading. Airlines straining to stay afloat, stop buying new planes and start canceling orders. By the end of 2020, Boeing will have lost more than a Thousand orders. Faced with the industry's severe downturn, Boeing resorts to desperate measures. It holds serious talks about whether to accept President Trump's offer of a federal bailout. Republican politician Nikki Haley quits the Boeing board in protest at the potential departure from free market principles. Calhoun eventually rules out asking for the government's help. Instead, he approves a plan to borrow $25 billion from private lenders. He also announces the loss of more than 12,000American jobs through buyouts and layoffs, primarily in the commercial aviation division based near Seattle. The 747 production line shuts down for good, ending the era of jumbo jets. The company also gets lower key help from the US Air Force due to technical problems with Boeing's KC46 tanker planes. The Air Force had been withholding payments to the company worth more than $800 million. But with the pandemic causing havoc, the Air Force agrees to release the money. It's a clear demonstration of the upside of Boeing's decision to buy McDonnell Douglas in the 90s. Its commercial division may be suffering, but its military and space operations are largely unaffected by the pandemic. And now those operations are helping to cushion the entire company against the financial wildfire laying waste to civil aviation. Not that it's enough to keep the company in profit. In 2020, Boeing racks up losses of almost $12 billion, the largest in its history. Even so, the year ends on a high, because on November 18, 2020, the Federal Aviation Administration finishes assessing the changes to the 737 Max and declares it is fit to fly again. Tonight. U.S. airlines and flight crews are rallying around the 737 Max. American is moving ahead with plans to resume passenger service as soon soon as December 29, following the FAA's order ungrounding the plane. FAA Administrator Steve Dixon, a pilot, flew the MAX last month. I can tell you now that I am 100% comfortable with my family flying on it. After nearly two years stuck on the ground, the 737 Max is about to return to the skies. And with it back in action, and the coronavirus about to be dangerous, tamed by vaccines, Boeing sees clear skies ahead. But just over the horizon, a major storm is heading its way. We all know that New Year's resolutions are hard, but what if you could make your resolutions automatic? 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But instead of being hauled before the courts on charges of conspiring to defraud the FAA about the max, Boeing's struck a deferred prosecution deal. And as part of that deal, Boeing will pay a criminal monetary penalty of more than $2.5 billion. The penalty includes a fund to compensate the crash victims and compensation to airlines who bought the 737 Max aircraft. Boeing will also take action to improve safety oversight and should it commit any US Federal felony during the next three years, Boeing will be prosecuted. In return, the Department of Justice exonerates Boeing's senior management and agrees they did not facilitate the misconduct. But while Boeing's payout saves it from being dragged before a judge, the deal doesn't protect its former employee. Mark Forkner. The 49 year old former 737 Max Chief Technical Pilot who talked of Jedi mind tricking regulators in internal messages, is still under investigation by a grand jury. In the months following the deal with the Justice Department, 737 max flights start to resume across the world. Regulators in Brazil, Europe and Canada joined the U.S. in clearing the plane for takeoff. Boeing is finally able to deliver to customers the 737 Max jets that have been stuck at its own airfield since the groundings. Airlines start ordering Maxs again. There are only two manufacturers to buy this kind of plane from and the waiting list for an Airbus A320neo is years long. Southwest Airlines orders 100 maxs in a deal worth around $5 billion. Alaska Airlines inks a deal to add another dozen Maxs to its fleet. European low cost carrier Ryanair announces it'll recruit 2,000 pilots to fly the Maxs it bought at a discount during Boeing's darkest hour. The rush of orders and deliveries launches Boeing back into profit for the first time since 2019. But as Boeing soars once again, the Max's former chief technical pilot, Mark Forkner is indicted on charges of deceiving airspace safety regulators, including the faa. Despite all the deaths, admissions, scandal and settlements, Forkner now stands alone. He is the only individual who worked at Boeing facing criminal charges for what happened with the 737 Max. In October 2021, Forkner appears in a federal court in Fort Worth, Texas to face charges of six counts of fraud. The prosecution accuses him of withholding information about the flight control system MCAS actions they contend that led the FAA to remove mentions of MCAS from pilot manuals in training. He enters a plea of not guilty. The judge sets a trial to start the following month. And on the steps of the courthouse, his attorney tells the media his client is the fall guy for both Boeing and the faa. Everyone who was affected by this tragedy deserved a search for the truth, not a search for a scapegoat. And if the government takes this case to trial, the truth will show that Mark did not cause this tragedy. Mark did not lie, and Mark should not be charged. But as Forkner digs in to clear his name, Boeing is rapidly putting the MAX crisis behind it. The last holdouts keeping the MAX grounded cave. In December, China ungrounds the Max. Indonesia follows shortly after. And in early 2022, Ethiopian Airlines starts flying its 737 Maxs again. In March 2022, Forkner's trial begins. He faces charges of four counts of wire fraud, each of which could result in up to 20 years in prison. But over four days in court, the defense poked holes in the prosecution's argument. It points out that Forkner wasn't an engineer or test pilot. His job was to ensure training simulators behaved like the real aircraft and to advise the FAA on what training and information pilots would need. The defense notes that Forkner wasn't provided with documentation about how Boeing had widened the range of conditions under which MCAS would activate. He only learned of this change after the Lion Air crash. With the claim that Forkner deliberately misled the FAA undermined, the two sides rest their cases. Within two hours, the jury decides Forkner is not guilty. It's the summer of 2022, and at Boeing's new head office, CEO Dave Calhoun is playing host to journalists from the trade publication Aviation Week. Boeing's top brass left Chicago for its new home in Arlington, Virginia, two months ago. Now they work out of an office sandwiched between Ronald Reagan Airport and the Pentagon. But Calhoun's hoping to do more than showcase the company's new corporate offices to the visiting journalists. He wants to use this opportunity to fire a shot across the bows of the politicians sitting on the other side of the Potomac river in Capitol Hill, the Aviation Week team asks if Boeing is a company in disarray. The 737 Max isn't its only problem. The arrival of its long range 777X aircraft is suffering repeated delays. Quality issues have left the company unable to deliver any 787 Dreamliners to customers for more than a year. And the company's net debt now stands at $44 billion. Calhoun breezily rejects the idea he's leading a company in crisis. He tells the journalists that Boeing has turned the corner. But aircraft manufacturing is not an industry that turns on a dime. Turning the corner takes place over years, not weeks. Asked about Boeing's space business, he says it's too soon to know if its investment in its Starliner spacecraft will pay off. Then the journalists ask him about Boeing's new 737 Max model, the Max 10. It's going to be the largest model in the Max family, capable of carrying 230 passengers. But under regulatory changes introduced following the MAX groundings, Boeing needs to update the cockpit to get the max 10 approved to fly. And that will be a costly change. Unless, that is, Congress agrees to waive that rule. Asked what might happen if Boeing doesn't get its way, Calhoun tells them the Max 10 could be canceled even though Boeing has more than 600 orders for its extra load large Max. It's a warning to Congress. Cut the red tape or watch billions of dollars worth of exports, investment and jobs vanish. The message is heard. Six months later, congressional leaders agree to let the new Max 10 skip the new rule. Three years after the Max crashes, normal service has resumed. But not for long. It's just after 5pm on January 5, 2024 and in Oregon, Alaska Airlines Flight 1282 just left the ground at Portland International Airport. The plane is a 737 Max 9 and it's headed to Ontario, California near Los Angeles. It's not a busy flight. There are 171 passengers leaving around a quarter of the seats empty. In the row just ahead of the mid exit door sits a 15 year old boy named Jack. With his seatbelt on, the plane continues its ascent, climbing towards 15,000ft at speeds of 250 miles per hour. Jack turns to look at his mom who's sitting elsewhere. When before he can process what happened, Jack feels his shirt being whipped from his torso. Oxygen masks tumble down from above. Air lashes his skin. He snaps his head around to his left. The headrest of his seat is gone and instead of an exit door, there's now just sky. He feels his seat being dragged backwards towards the hole. His mother grabs him, holding him tight and pulling him towards her. As the initial depressurization eases, his mom and the passenger in the aisle seat help drag him away from the seat by the hole. Then a flight attendant gets him to a spare seat seat further up the plane. As he buckles up and puts on his oxygen mask, the woman in the next seat mouths something to him but noise and wind drown out her words. She realizes he can't hear her and grabs her phone she opens the notes app, types a message asking if he's okay and shows it to him. Jack gives a thumbs up as he pulls his oxygen mask. She types another message. Were you in that row? Jack gestures for the phone. Phone. She passes it to him. He types her reply. The woman notices his skin's been left red and raw from the windburn. Jack hands back the phone. She reads the message. I was. I can't see my mom. The woman quickly reassures him that she's probably just further up the plane. Jack looks up the aisle and sees the cockpit door has been blown wide open. Inside, the pilots are scrambling to arrange an emergency landing. Jack gestures for phone again and types a new message saying he wants a selfie with her. The woman laughs and they pose for the snapshot. Fifteen minutes later, they and the other shaken passengers are back at Portland International. Everyone's safe with only a few minor injuries. But unlike Jack for Boeing, this will be no crazy story to tell friends or share on social media. This incident is going to get the maximum grounded again and send Boeing to the very brink of collapse. You know, everyone's path to wellness is different, but one thing's for sure, hydration is key. And the best way to stay hydrated is with Liquid iv. Powered by Liv Hydro Science. See, Liquid IV has an optimized ratio of electrolytes, essential vitamins and clinically tested nutrients. The turn ordinary water into extraordinary hydration so you can break the mold and own your ritual. Just one stick plus 16 ounces of water hydrates better than water alone. 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After being unloaded from the train, the fuselage heads to the 737 max assembly line. Boeing is producing more than 40 maxs a month here since the heavy losses caused by the Max groundings and the pandemic. Boeing's under pressure from Wall street and its customers to make up for lost time, so it's doing all it can to get planes out the door. The next day, Boeing's engineers spot a problem in the fuselage's left mid exit door panel. Five damaged rivets down one side. They need to be fixed, but Boeing's not going to halt this production line for that, so the problem is logged as one to fix later down the production line. Boeing calls these problems that are spotted but not fixed until later down the line. Travel Traveled Work the idea of traveled work is to keep the assembly line moving at all times instead of halting the entire production line while waiting for a team from Spirit to come and fix the issue. Work continues. Over the next two weeks, the fuselage with the problem rivets continues its journey through the facility. Hundreds of Boeing employees swarm around it, turning that bare fuselage piece by piece into a multi million dollar passenger passenger jet for Alaska airlines. Then on September 19, the team from Spirit arrives to fix the rivets. By then, the fuselage is no longer a bare shell. It's now close to rolling off the production line. The Spirit team removes the plug door to get at the damaged rivets and replaces the rivets. The team takes photos to show the job's done and puts the door back on. With the fix complete the plane moves to the final stages of assembly. But the team that replaced the rivets made an error. They forgot to replace four critical bolts on the plug door. And no one else notices until four months later in January 2024, when that door blows out with passengers on board just after takeoff from Portland, Oregon. The next day, the Federal Aviation administration grounds the 737 Max again. This grounding is less severe and only applies to the Max 9 model. But the high profile incident shoves the concerns about the quality of Boeing's manufacturing into the spotlight once again. Hundreds of Boeing aircraft fly every day without incident. But after the two Max crashes, problems with the 787 Dreamliner and a door that bursts off during a flight, confidence in Boeing is shattered. Travel website Kayak reports that the public are now adjusting their searches to avoid flying on 737 Maxs. Boeing rushes to get in front of the problem. It quickly works out a new inspection process and promises a crackdown on traveled work. But that forces production of the 737 Max to shrink from 40 planes a month to just 15. And that leaves airlines waiting on new planes hanging. And this time, they're not going to keep quiet about it. At the end of January, the FAA closed clears the Max nine for takeoff again. But the fallout from the Alaska Airlines incident is only just starting. In March 2024, the CEOs of Boeing's biggest US customers, American, Alaska, Southwest and United, joined forces. They request a meeting with Boeing's board of directors, but without CEO Dave Calhoun present. They want clarity about what Boeing's really doing to fix its quality issues. And they want it without the evasiveness they feel they get from Calhoun or Boeing's commercial airlines chief, Stan Deal. The rolling chaos at Boeing is disrupting their entire business. Airlines ability to plan ahead is stymied by delayed deliveries of aircraft. They order new plane models, stuck in development groundings and repeated safety incidents. And they're also the ones becoming the butt of jokes on Saturday Night Live. That's why our new slogan is Alaska Airlines. You didn't die and you got a cool story. On other airlines, you can watch movies, but on Alaska, you're in the movie. And if you think Alaska, the state is cold, just wait till our plane's roof trips off. As the weeks go by, the airline's frustration with Boeing boils over. United CEO says the company is now looking to buy Airbus jets to make up for the delayed arrival of the Max 10. But with Airbus waiting list now stretching to 2030, switching to the opposition is no quick fix. Southwest CEO publicly calls on Boeing to stop production and get its issues fixed for the good of the entire aviation industry. The boss of Ryanair reveals how his company spends 48 hours checking every Boeing jet it receives for errors and omissions with customer, passenger and regulator. Confidence in Boeing cratered and retirement nearing. Calhoun resigns as CEO, but his exit is no instant fix either. Over the next few months, Boeing staggers rather than recovers. Its Starliner spacecraft delivers two NASA astronauts to the International Space Station for a one week mission. But it then develops propulsion issues forcing it to return to earth without its crew and leaving the astronauts stranded in space, waiting to be rescued by Boeing's rival, SpaceX. It's more bad publicity for Boeing's engineering capabilities and a headache that the company does not need. Boeing announces it will buy Spirit Aerosystems, the Kansas manufacturer that builds 737 Max fuselages, for more than $8 billion of stock. It marks a reversal of the outsourcing strategy Boeing adopted after the McDonnell Douglas merger. And it's a shift the company claims will improve quality and safety. A few weeks later, Boeing's new CEO, Kelly Ortberg, takes charge of the business. He decides to base himself in the company's original hometown of Seattle and pledges to restore Boeing's legacy by repairing its broken culture, improving execution and scaling back. Since the 737 Max crashes, Boeing has lost more than $33 billion. It's saddled with nearly $58 billion of debt and its supplies of cash are running low. And that means Ortberg needs to move fast. He announces plans to cut 17,000 jobs and sell $25 billion of shares in debt. He also announces the company may sell some of its space operations. But before that can Happen, the company's 33,000 machinists vote to go on strike, rejecting Boeing's offer of a 25% pay raise over four years. Strike. Strike. This morning, the US economy bracing for impact after 33,000 Boeing Union members walked off the job and to the picket lines on strike and rejecting the troubled jet makers latest offer that would have hiked pay by 25% over four years. The first thing I saw right off the bat was a 25% raise over a four year period. That's not going to catch up with my rent and my bills. The strike turns Boeing's cash problems into a cash crisis. It will further delay aircraft deliveries for the customers and cost the company around $1 billion a month. The walkout shakes investor confidence. Boeing's share price is pushed below $150, down from well above $300 before the first 737 Max crashed. Fears mount that Boeing's creditworthiness could be downgraded to junk status. Faced with a need to bring in cash, Boeing announces that it will issue more shares to try and raise more than $20 billion. After seven weeks of workers striking, Boeing agrees to give the machinists a 38% pay raise over four years to get them back to work. The deal also includes changes to retirement plans and a one off $12,000 bonus. But while Boeing is out of its immediate Crisis, it begins 2025 in need of a reset. Over the past 30 years, its decisions have taken it far off course. It is still the United States largest exporter, critical to both the country's economy and its defense. But its reputation is tarnished, its customers unhappy, and its safety record undermined. Since the McDonnell Douglas merger, Boeing's focused on financial engineering in a quest to delight its shareholders. Now the company and its shareholders are suffering because of it. Coming up on Business wars, we're talking with one of the senior managers at Boeing who worked on the 737 Max, the plane at the heart of the crises at the company. Later, Wall Street Journal reporter Sharon Turlip answers the billion question. Can Boeing ever bounce back? You don't want to miss it. If you like Business wars, you can binge all episodes early and ad free right now by joining Wondery plus in the Wondery app or on Apple podcasts. Prime members can listen ad free on Amazon Music. Before you go, tell us about yourself by filling out a short survey@wondery.com survey from wondering. This is episode four of the Unraveling of Boeing for Business Wars. A quick note about the recreations you've been hearing. In most cases, we can't know exactly what was said. Those scenes are dramatizations, but they're based on historical research. I'm your host, David Brown, written by Tristan Donovan of Yellow End, researched by Marina Watson. Sound designed by Joe Richards. Fact checking by Gabrielle Jolais. Our managing producer is Desi Blalock. Our senior managing producer is Callum Plews. Our producers are Tristan Donovan and Grant Rutter. Our senior producers are Emily Frost and Dave Schilling. Our executive producers are Jenny Lauer, Beckman and Marshall Louie for Wondering. And now a next level moment from ATT Business. Say you've sent out a gigantic shipment of pillows and they need to be there in time for International Sleep day. You've got AT and T5G so you're fully confident, but the vendor isn't responding and International Sleep Day is tomorrow. Luckily, AT&T 5G lets you deal with any issues with ease, so the pillows will get delivered and everyone can sleep soundly, especially you. 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