Boeing: New Electrical Issues Threaten the 737 Max Rollout

The latest issue may threaten the future of the already embattled next-generation commercial aircraft

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John Engle
Apr 16, 2021
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The Boeing Co. (

BA, Financial) has spent more than a year trying to recover from the 737 Max crisis. As I have documented previously, the future of the next-generation passenger aircraft was thrown into doubt after two deadly crashes that proved to have been caused by faulty software and systems design.

The crashes forced the grounding of the aircraft while Boeing worked frantically to correct the lethal defects. It took 20 long months, but Boeing's work appeared to have finally paid off when, in November, the Federal Aviation Administration cleared the 737 MAX to return to service.

It seemed as if the 737 Max saga was finally at an end. Unfortunately, a new defect has emerged that could again threaten the survival of the program.

Electrical issues spark trouble

The 737 Max's latest issue was brought to light on April 8, when Boeing disclosed that it had discovered a new electrical issue "on a production airplane during normal build activity." As a result of the discovery, Boeing grounded 60 of the nearly 200 737 Max planes that have returned to service since the FAA gave it the all clear. As the Seattle Times explained on April 9, the issue came about as a result of changes to the aircraft's manufacturing process:

"A minor change in Boeing's 737 MAX manufacturing process that was insufficiently vetted caused an electrical system problem...The problem, according to two people with knowledge of the modified manufacturing process, arose when a backup electrical power control unit was secured to a rack on the flight deck with fasteners in place of the rivets previously used. This change was executed in such a way that it did not provide a complete electrical grounding path to the unit. The lack of secure electrical grounding could potentially cause malfunctions in a variety of electrical systems, such as the engine anti-ice system and the auxiliary power unit (APU) in the plane's tail."

As Boeing's investigation into the electrical issues expanded, it quickly determined that the problem was graver than first believed. On April 16, the company announced that it had expanded the 737 MAX grounding to approximately 90 aircraft.

Another crisis, another round of cancellations

Boeing's 737 Max order book took a severe hit after the initial grounding order was issued in March 2019. The venerable aerospace giant did everything it could to keep its airline customers from jumping ship, which helped to stem the bleeding a bit. After the FAA gave the aircraft the green light, fresh orders began flowing in at a faster pace than many analysts and commentators had anticipated. Unfortunately, this latest blow has shaken several airlines' faith in the aircraft. Turkish Airlines, for example, announced that it had cancelled 10 of its 75 737 Max orders outright, and switched 40 more into purchase options rather than definitive orders. Other cancellations may well follow.

The 737 Max's electrical issue, which came about as a result of faulty production processes, can hardly be considered an isolated incident. Indeed, it may be seen as just the latest in a series of incidents concerning Boeing's manufacturing practices, as aviation journalist Gabriel Leigh pointed out on April 14:

"Boeing is under a lot of scrutiny at the moment for failures in its manufacturing processes in recent years that have led to quality control issues with several of its aircraft most notably the 787 Dreamliner. Although it's been less noticed in mainstream press, the 787 has been beset with production issues that have led to a significant slowdown in deliveries in recent months as airframes needed to be checked and in many cases fixed before being delivered to customers. These manufacturing issues may end up costing Boeing billions to fix when all is said and done to say nothing of the further hit to its reputation...But the fundamental issues at Boeing remain an ongoing concern, and even as the company fixes aircraft problems as they come up, many are wondering just how deep these problems go, and whether we've now seen the end of them. This latest 737 MAX issue only feeds those concerns."

My take

As I see it, the electrical issue now plaguing the 737 Max represents just one in a lengthy series of problems for Boeing, all of which stem from the same basic issue: bad manufacturing.

Boeing has long been revered as a leader in the aerospace industry, both commercial and defense. Yet its reputation for design and manufacturing excellence has been increasingly tested by a litany of manufacturing failures. Reliability and safety are the paramount concerns of the aviation industry. If Boeing cannot live up to those standards, its business will undoubtedly suffer.

Disclosure: No positions.

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John Engle is president of Almington Capital Merchant Bankers and chief investment officer of the Cannabis Capital Group. John specializes in value and special situation strategies. He holds a bachelor's degree in economics from Trinity College Dublin, a diploma in finance from the London School of Economics and an MBA from the University of Oxford.