• Joe Cahill On Business
  • Joe Cahill On Business

    What will it take to steer Boeing back on course?

    "It's not a quick marketing fix."

    Alamy

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    As the world wonders when aviation authorities will lift their grounding order on the Boeing 737 Max, it's easy to forget that clearance to fly 800 grounded jets isn't the end game for Boeing. After regulators sign off, Boeing needs to start selling the Max again.

    79彩票注册网址And that requires one of the biggest reputational reclamation projects any company has faced. Once a shining symbol of American technological achievement and manufacturing prowess, Boeing's brand now evokes images of corporate heedlessness after two crashes of its flagship jet killed 346 people.

    Investigations blamed flawed flight control software for the tragedies, while also exposing a company culture that appeared to prize profitability and delivery schedules over safety. Internal showed employees questioning the safety of the Max and describing efforts to steamroll regulators during the plane's original certification process.

    79彩票注册网址The revelations shredded Boeing's reputation for quality and raised serious doubts about its commitment to safety. Repairing that damage will have to be a top priority for newly appointed CEO David Calhoun if he hopes to save Boeing's biggest moneymaker.

    Rehabilitating Boeing's image won't be easy, cheap or fast, says Tim Calkins, a marketing professor at Northwestern University's Kellogg School of Management.

    79彩票注册网址"It's not a quick marketing fix," Calkins says. "Boeing can't just run ads saying the plane is safe, because as soon as you do that, people start wondering if the plane is safe."

    Unlike a retailer or consumer products company that deals mainly with the general public, Boeing must restore the trust of multiple constituencies. Regulators, airlines, pilots and travelers all have serious questions about the company's credibility across a range of issues. Merely fixing the Max flight control software won't dispel those doubts, Calkins says. Boeing also must show it has eradicated any cultural tendencies that compromise safety.

    Multifaceted concerns call for a multipronged approach. Boeing needs to assure regulators that it's providing all information necessary to evaluate the safety of its planes and stop pressing them for quick recertification. Calhoun took a step in that direction when he pushed back the expected recertification timetable to midyear.

    Pilots aren't likely to be satisfied with a few demonstration flights with airline CEOs aboard. Aviators may want not only simulator training but test flights showing how the new flight control software works.

    Airlines—Boeing's actual customers—may expect Boeing to help assuage travelers' safety fears, perhaps through the kind of "mea culpa" ads other big companies in trouble have rolled out. One customer has called on Boeing to change the Max's name.

    Carriers considering new purchases will wonder if Boeing can deliver planes when they need them. That will be difficult for Boeing after a grounding order of more than a year, and a Max that idled 680 suppliers. When regulators recertify the Max, job one will be installing new software on 381 grounded jets held by airlines plus 400 undelivered planes parked in Boeing lots.

    79彩票注册网址As for production, Boeing likely will need a long time to reach its preshutdown pace of 42 planes per month, much less its goal of 57 monthly deliveries by June. Production will rev up gradually, with backlogged orders rolling out years late and new orders waiting even longer.

    Archrival Airbus, meanwhile, likely will be able to fill new orders much sooner. Boeing faces a long struggle to reclaim the Max's precrisis market share, a reality with serious financial implications. The 737 is Boeing's bestselling plane, accounting for 40 percent of company profits. Boeing may have no choice but to cut selling prices for the Max below the usual airline industry discounts.

    79彩票注册网址"Boeing could just really deeply discount the plane more than Airbus is willing to," says analyst Scott Hamilton at Leeham. Of course, deep discounts would sacrifice profits to win orders.

    Working in Boeing's favor is airlines' desire for more than one supplier. Carriers would lose bargaining power if Airbus were to control the entire market. But airlines don't necessarily care if Boeing regains its prior market share, as long as it remains a viable vendor.

    79彩票注册网址Airbus' advantage could last until Boeing offers airlines something the European manufacturer can't supply, such as the new middle-market jet Boeing has been mulling for years.

    "They need a new product," says analyst Richard Aboulafia at Teal Group.

    Calhoun said this month that Boeing is re-evaluating its approach to the new jet. While any new plane from Boeing would face intense scrutiny, it may be the company's best chance to fade the stain of the 737 Max.

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