Boeing admission could cause serious problems

Under pressure Boeing has admitted the company knew about problems with 737 Max jet airliner before fatal crashes occurred.

News that Boeing was aware of problems before all onboard two aircraft were killed in crashes means the potential damage to the company could become longer lasting and more financially damaging than previously thought.

The company had already announced it would not provide full-year sales and profit forecast after releasing its worst quarterly results for years.

Boeing outlook

Worse still, no target for returning the plane to the skies has been declared and airlines are queuing up to claim compensation due to fleets being grounded.

The most recent statement from Boeing regarding the 737 Max worsens the outlook. Going public now will help to limit the immediate damage to the plane manufacturer and provides some degree of protection of the brand image on a long-term basis.

Yet it also raises questions concerning what further stories will emerge as what is a very serious threat to future business drags inexorably onwards.

Admission makes securing a prosperous future for 737 Max much tougher

Reportedly even if the fault with the Angle of Attack (AOA) feature had functioned as intended, it is highly unlikely the two crashes would have been prevented.

Despite this, the recent news makes the defence against angered airlines harder to maintain in terms of protection of brand image and of securing future sales.

Trust between airlines and aircraft manufacturers is essential owing to the lengthy development lead times and the decades of service they are expected to provide.

If leading airlines lose trust in Boeing, winning them back will be a colossally difficult task. Worse still, much of the lost business would likely go to rival Airbus, granting the company new revenues vital to future projects.

Given the Boeing order book is stuffed with purchases for variants of the 737, the present situation may help motivate airlines to get out of deals made prior to the two crashes. How successful those efforts will be remains to be seen.

Possible financial consequences are stark

Boeing has a backlog of 5,600 aircraft valued at nearly US$400 billion, but in the first quarter of 2019, the company sold just 32 new planes in what was a major downturn from the 122 sold in the same period in 2018.

Although the company can increase production once the 737 Max returns to commercial use, the lack of information regarding what the immediate future will hold leaves many questions unanswered.

Long-term plans would have been predicated on the company receiving full payment for those 5,600 aircraft. Reduced revenue could very well occur, causing a plethora of future issues.

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