Editor’s Note: This story was written before the release yesterday of an independent Expert Panel appointed by Congressional mandate to review Boeing’s safety culture. The report may be downloaded here: Boeing Safety Study by FAA Panel 2-26-24
By Scott Hamilton
The interior of the Alaska Airlines Boeing 737-9 MAX at Row 26, where the emergency exit door plug separated from the airplane at 16,000 ft.
Feb. 27, 2024, © Leeham News: The safety culture at Boeing Commercial Airplanes (BCA) came under fire again following the Jan. 5 Alaska Airlines Flight 1282 accident in which an emergency exit door plug separated from the plane on climb out from the Portland (OR) airport.
The plane, a 10-week-old 737-9 MAX, fully depressurized at about 16,000 ft. Nobody died and injuries were slight. Damage throughout the cabin and into the cockpit occurred when the door plug, at row 26, blew out. Pilots landed the plane safely at Portland 14 minutes after the decompression.
Within days, quality “escapes” were determined to have occurred at Spirit AeroSystems, which built the fuselage and door plug, and at Boeing during final assembly. Since Boeing had the fuselage last and its employees completed the final assembly, Boeing’s ultimately responsible for the quality escapes.
Boeing Co. CEO David Calhoun was quick to accept responsibility for the company. Such life-threatening escapes should never happen, he said. Calhoun appointed an independent safety committee headed by a retired Admiral, Kirkland Donald, with a nuclear submarine safety background.
The appointment of a special safety committee is reminiscent of a board-level safety committee appointed in September 2019 by then-chairman and CEO Dennis Muilenburg in the aftermath of the MAX crisis following the October 2018 and March 2019 fatal accidents of two 737-8 MAXes. These accidents killed 348 people and led to a 21-month grounding of the global MAX fleet from March 13, 2019.
Jon Holden, the president of Boeing’s largest union, the IAM 751, said neither he nor others from the union had any contact from the 2019 committee. Boeing’s engineering and technicians union, SPEEA, declined comment. But a source familiar with the situation said the union didn’t see any changes implemented from the 2019 committee at its level.
Strides to improve, work to do
David Calhoun, CEO of The Boeing Co.
In the intervening four years and three months, Boeing took major strides to improve BCA’s safety culture. This culture came under withering fire in the MAX accident investigations. However, the safety culture had long been criticized by BCA’s two principal unions, SPEEA (engineers and technicians) and the IAM 751 (the touch labor union).
Following Alaska 1282, Calhoun admitted Boeing still has work to do for its quality control and safety.
“Whatever final conclusions are reached, Boeing is accountable for what happened,” Calhoun said. “An event like this must not happen on an airplane that leaves our factory. We simply must do better for our customers and their passengers. We are implementing a comprehensive plan to strengthen quality and the confidence of our stakeholders. It will take significant, demonstrated action and transparency at every turn – and that is where we are squarely focused.”
What progress has been made since the 2018-2019 MAX crisis?
“We’ve provided annual public updates on our actions related to safety on Boeing.com with Chief Aerospace Safety Office (CASO) report by Mike Delaney and his leadership team. I’m expecting an updated report in May 2024 as well,” a spokesperson said.
Reconstituting the Board of Directors
The spokesperson, in an email to LNA, wrote that since 2019 the Board of Directors has been reconstituted. LNA noted in January 2020—the month that Calhoun took over from the fired Dennis Muilenburg—that the Board bore culpability for the MAX crisis and most directors had been on the Board for years. At the start of the first MAX crisis, LNA reported that there was no Board representative from commercial aviation.
Member Larry Kellner had an airline and private equity and Calhoun’s career at GE Aviation was at the time a distant memory. All others on the Board had finance, military, and political backgrounds.
Since then, Calhoun has led the appointment of new blood, reduced the “good old boys” network tenure and some members now have commercial aviation experience. Oddly, there is still no representative from the greater Seattle area, where more than 50% of The Boeing Co’s revenues originate.
The BCA spokesperson wrote:
The Board has undergone significant changes, adding deep safety, engineering, and manufacturing experience.
- Since April 2019, eight independent directors have left the Board, and eight directors are new to the board. These eight new directors collectively bring significant experience in aerospace, safety, engineering, manufacturing, supply chain management, and more.
- Among the current board directors:
- 10 have engineering and technology leadership.
- 9 have in-depth safety experience.
- 7 have complex manufacturing expertise.
- The Board amended the company’s Corporate Governance Principles to include safety-related experience as one of the criteria it will consider in choosing future directors.
- The Board launched and operationalized our Aerospace Safety Committee providing oversight of engineering, design, development, manufacture, production, operations, maintenance, and delivery of aerospace products and services.
- The Board added operational metrics to incentive structures for executives and employees, including product safety, employee safety and quality metrics.
Operational changes
Boeing undertook several initiatives to enhance operational safety and related procedures. The spokesperson wrote:
- We established the Chief Aerospace Safety Officer position and established operations councils overseeing Boeing manufacturing, quality, supply chain, and program management.
- We brought together more than 50,000 engineering teammates into a single, integrated global organization reporting to the Chief Engineer. The realignment provides a greater emphasis on safety as it increases transparency, collaboration, and accountability across all engineering designs and decisions.
- We established a dedicated ombudsperson for FAA Organization Designation Authorization (ODA) representatives, providing these employees with an additional channel to raise work-related concerns.
- We launched the Speak Up program and the Seek, Speak, and Listen habits encouraging and rewarding all employees for speaking up and raising issues that need to be addressed.
- Boeing implemented an enterprise-wide Safety Management System (SMS) and Quality Management System (QMS) that is grounded in a positive safety culture that encourages employees to speak up and report hazards and concerns. We deployed required Safety Management System training to all employees.
Safety Committees named
Investments
Boeing invested in its workforce, hiring engineering and manufacturing personnel. The employment levels now exceed pre-pandemic levels. The spokesperson wrote:
- Engineering has grown by approximately 10%, exceeding pre-pandemic levels.
- Manufacturing has grown by approximately 11%, exceeding pre-pandemic levels.
- We have also invested in quality across the enterprise, increasing the number of quality employees by more than 25%, exceeding pre-pandemic levels. And since 2019, we have increased the number of Commercial Airplanes quality inspectors by 20%.
- Over the last several years, we’ve taken close care not to push the system too fast, and we have never hesitated to slow down, to halt production, or to stop deliveries to take the time we need to get things right. We stopped delivering 787s for over a year to ensure that each conforms to our exacting specifications prior to delivery. And on the 737 line, we have regularly slowed rate breaks to support the stability of the overall production system and to correct non-conformances when identified. We took 1.5 years to transition from a rate of 31 per month to 38 per month.
Boeing safety reports
The 2024 CAO report is expected to be published in May.
Work still to be done
A retired Boeing safety employee with contacts with current employees tells LNA there are still those who fear retribution if they bring safety concerns to managers. He also questions the effectiveness of the Safety Management System (SMS) Boeing adopted.
“First, the FAA to this day still hasn’t mandated SMS for manufacturers, Part 135 or Part 145. It’s mandated for part 121 airlines only. For the record, even the FAA doesn’t follow an SMS program for itself.
SMS requirements are outlined in federal regulation CFR Part 5.
“We worked on SMS with the understanding of ‘an acceptable level of SMS’ as the FAA and the Boeing executives agreed to call it. In late 2020 the FAA finally approved an acceptable safety standard on SMS for BCA,” the former employee tells LNA. This person notes that the FAA doesn’t care about enterprise-wide SMS, their concern is BCA only.
“The SMS was rolled out to all BCA employees afterward. We set up a ‘Speakup for Safety’ web portal for employees to report hazards anonymously or using their name for follow-up. This web portal works very well,” the former safety official said.
SMS is composed of four functional components:
- Safety Policy
- Safety Risk Management
- Safety Assurance
- Safety Promotion
Risk management is the most critical and is divided into minor and major risks and how these risks are managed and mitigated is the key to a robust SMS.
Mixed reviews
“From the feedback I’m receiving, it is mixed reviews,” the former employee tells LNA. “Many managers are clueless to this day about what it’s about, much less ask rank and file employees. I still hear how employees are afraid to report problems, for risk of losing their jobs.
“Lastly, the other key component of the FAA signing off on the program was BCA being transparent on sharing data metrics. The airlines share everything, but I know for a fact Boeing doesn’t, mainly because of proprietary rules,” the former employee tells LNA.
Executive Incentives
Boeing changed the formula for executive incentives. The 2023 Proxy statement (for 2022) outlines the long-term incentive plan for executives.
The payouts to senior management are based on a combination of metrics divided into two buckets: Financial Performance and Operational Performance. The basic relative weighting is 75% Financial and 25% Operational. The weighted payout range is up to 175% Financial while Operational is capped at 25%. Therefore, Financial Performance is given a 3:1 advantage in weighting but increases to 7:1.
Product Safety is included in the Operational Performance metrics, along with four other elements: Employee Safety, Quality, Climate and Diversity, Equity and Inclusion. All are weighted equally within the category of Operational Performance.
Product Safety and DEI share the same weighting in the long-term incentive plan design. The Product Safety measuring stick required completion of “at least 600 design practices and 25 model-based engineering solution kits….”
Financial Performance metrics comprise a combination of free cash flow (the dominant metric), revenues, and earnings. Cash flow, revenues, and earnings, given the weighting and payout range, are therefore favored 15:1 or 35:1 over Product Safety.
“I’m not against metrics that address shareholder value,” says an expert who reviewed the Proxy. “It’s fundamental for any company to build shareholder value. I do think ‘free cash flow’ as a dominant metric can drive unhealthy behavior. The main thing is that in this construct safety is not something (in my opinion) that is terribly relevant to the compensation plan.
“I’m sure if you ask any member of Boeing management team, they would be able to truthfully and sincerely say that safety is paramount to any cash flow metric or incentive plan consideration. However, the long-term incentive plans also need to reflect the company’s values and the board’s priorities, and changes are in order.”
Spirit AeroSystem
Spirit AeroSystem, which makes the 737 fuselages and the plug door that was on the Alaska MAX 9, has had its own safety and quality assurance issues. Tom Gentile was replaced last year by the Board of Directors in part because of the seemingly endless series of quality escapes on the 737 and 787. (Spirit makes the nose section of the 787.)
Replacing Gentile was Board member Pat Shanahan. Shanahan spent more than 30 years in various positions at Boeing, including VP of Programs response for all the 7-Series commercial airliners. He left Boeing to become deputy secretary of the Defense Department under the Trump Administration. He retired following opposition to his elevation to Defense Secretary, becoming a Spirit Board member later.
On the 2023 year-end earnings call, a few weeks after the Alaska 1282 accident in which Spirit was implicated, Shanahan announced that there will be a change in Spirit’s long-term executive payout plan.
Michael Ciarmoli of Truist Securities noted the 2023 Proxy Statement (for 2022) reported that only 20% of cash compensation was tied to quality and none was tied to long-term incentives. “Are you planning on changing compensation to…focus more on quality?”
Shanahan said yes.
“It will be significantly different,” the new CEO replied. “The heaviest weighting will be on quality. I’m really working on designing it. I want to make sure that it drives the right behaviors, and we can measure performance. You’ve got to really look at the utility industry we’re in. There’s a significant penalty for quality escape.”
Shanahan said he wants a system in place to measure defect reduction and whether there is any type of escape. “We’re changing [incentives] fundamentally and we’re now making sure that what we put in place works well and drives the right kind of behavior.”
Another Safety Study
On Jan. 5, 2023, the FAA appointed an outside committee tasked with reviewing the Boeing safety culture. Members included MIT, airlines, unions, and other parties. The day, ironically, was one year to the day before the Alaska 1282 accident. The report was due to be delivered to the FAA last month. It’s been delayed following the 1282 accident.
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