In January, Dave Calhoun was appointed CEO of the Boeing Corp. (NYSE:BA). He took over from Dennis Muilenberg, who was ousted amid increasingly embarrassing revelations concerning the development and rollout of the 737 Max aircraft. A slapdash design and faulty software led to the fatal crashing of two planes and the indefinite grounding of the model.
While the travails of the ongoing 737 Max affair continue to grab most headlines, Calhoun has faced an even more pressing decision: what to do about the New Mid-Market Aircraft (NMA) program.
Deepening dysfunction
For years, Boeing touted the potential advantages of its NMA, a commercial passenger airplane designed to fill the underserved medium haul, medium passenger load niche. In early 2019, rumors swirled that the NMA, branded as the Boeing 797, would soon see the light of day. Yet, instead of debuting with great fanfare, the NMA has instead languished.
On Oct. 28, John Ostower, editor-in-chief of leading aerospace industry publication The Air Current, described the 797/NMA as trapped in a limbo state “somewhere between a real project and non-viable concept,” while many top-tier potential customers have given it an increasingly cold reception:
“Top executives at global airlines and lessors, including many who were thought to be likely large launch carriers for the NMA (which would eventually become the 797) have soured on the idea of Boeing’s 220 to 270-seat twin-aisle concept and are privately pushing for a successor to the 737 Max and the aging fleet of 757s.”
Making matters worse, the Boeing 797 has been beaten to market by the Airbus A321XLR, which debuted at the Paris Air Show and has thus far received warm receptions from buyers. Airbus’s plane can carry 220 passengers and is built for the same medium-haul, medium passenger load niche the 797 was meant to fill.
Pulling the plug
Calhoun wasted no time in addressing the 797/NMA issue. On a Jan. 22 conference call, the newly-minted CEO announced that Boeing would be going back to the drawing board with the NMA:
“Since the first clean sheet of paper was taken to it, things have changed a bit…the competitive playing field is a little different... we’re going to start with a clean sheet of paper again; I’m looking forward to that.”
While a clean slate may be liberating to a degree, it also means the pressure is even greater to deliver something game-changing. Yet, as industry analyst Nicholas Cummins opined in a Jan. 23 article for Simply Flying, Boeing may not have the stomach – or the resources – to develop a whole new aircraft:
“With this news, Boeing will be looking at around five years to bring a new aircraft design to market (just the design, then they have to build and test it). But with the airframe builder asking for $10 billion USD in loans, do they have an appetite to design a whole new expensive aircraft?”
Recycled resurrection
An alternative option might be for Boeing to resurrect another scrapped aircraft, the 787-3. This possibility was floated by Addison Schonland of AirInsight Research at the Feb. 6 meeting of the Pacific Northwest Aerospace Alliance:
“The 787-3 died a miserable death. What would happen if maybe the solution for Boeing and NMA is staring them in the face...Boeing has a very good record of understanding how the 787 works - where its strengths are, how they can tweak it. What would happen if Boeing were to dust off that thing we called a 787-3, let’s tweak it, let’s take some weight out, let’s do some clever stuff with it, and maybe that’s our NMA.”
Boeing has little time to lose in relaunching its NMA program. With Airbus eating up market share and building a robust order book, Boeing may not have the luxury of redesigning an NMA offering from scratch. On the other hand, cutting corners was what led to the 737 Max crisis in the first place. Boeing’s customers, as well as management, may be leery of repeating its past mistakes with another rush job.
Verdict
In my view, the dysfunction surrounding the 797/NMA development offers further proof of deep-seated pathologies afflicting Boeing’s corporate culture and management strategy. Clearly, the problems run much deeper than the 737 Max.
Boeing has a long way to go in restoring market trust. Decisive action on the NMA program could help assuage investors’ fears about the company’s leadership drift, but it will need to deliver if it hopes to regain its former standing. Given Boeing’s recent track record, betting on better days ahead seems premature in the extreme.
Disclosure: Author is short Boeing.
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