Boeing CEO Poised to Pitch 737 Max Comeback Case to Shareholders

(Bloomberg) -- Dennis Muilenburg is used to presiding over sleepy annual meetings as chief executive officer of Boeing Co., basking in the glow of a soaring share price.

This year, the aerospace giant’s CEO can expect a grilling from investors and reporters. Outside the Chicago gathering, protesters are expected to rebuke the company for a safety crisis that has engulfed the best-selling jet of the world’s largest planemaker.

Until an Ethiopian Airlines 737 Max 8 slammed into the ground shortly after takeoff March 10, Muilenburg’s Boeing had dominated the Dow Jones Industrial Average with a strategy best known for containing risk and returning cash to investors. Boeing still trails only Microsoft Corp. in share gains on the 30-member Dow since Muilenburg took over in July 2015.

The questions may sharpen following a report of four calls to a whistle-blower hotline at the Federal Aviation Administration the day after the Ethiopia crash. The calls, CNN reported Saturday, were from current and former Boeing employees concerned about the sensor that measures the plane’s angle while flying.

At least one complaint alleged damage to the vane’s wiring by a “foreign object,” CNN reported. A malfunction of the Max’s sensor has been cited in a preliminary report on the crash by Ethiopian investigators.

Boeing didn’t tell Southwest Airlines Co. when the carrier began flying 737 Max jets in 2017 that a standard safety feature had been deactivated, the Wall Street Journal reported Sunday, citing unidentified people familiar with the matter. After the October 2018 crash of a 737 Max operated by Indonesia’s Lion Air, Southwest asked Boeing to reactivate alerts on planes in its fleet and mid-level FAA officials briefly considered grounding Southwest’s Max aircraft, the Journal reported.

Shares of Boeing changed hands at $380.30 in early New York trading on Monday, little changed from Friday's closing price.

The company has put stock buybacks on hold, and executives are struggling to salvage Boeing’s reputation and public confidence in the 737 program, the company’s main source of profit. In addition to facing shareholders, the CEO will also hold his first press conference since the crash. Outside, a group representing relatives and friends of victims is planning a silent protest about “defects and secrecy related to the 737 Max.”

Muilenburg last week outlined Boeing’s plan to contain the financial fallout from a global grounding of the 737 to investors. Looming next is an even tougher task: convincing regulators around the world that the single-aisle jet is safe to fly.

Software Redesign

Boeing has redesigned and extensively tested software that was linked to the Ethiopia disaster and the October accident in Indonesia. The system misfired and repeatedly pressed the nose of the Max down until flight crews lost control of both doomed aircraft. The crashes killed 346 people.

While Boeing has stressed a redesign that will prevent the system from erroneously activating, the company hasn’t yet provided a full accounting of how its flight-control engineers came to design the feature. Without that narrative, there’s much confusion and uncertainty over the extent of the Max’s defects.

“In the absence of them confessing the flaw here, then any narrative is valid in the minds of people,” said aerospace analyst Richard Aboulafia.

The accidents have also damaged the standing of U.S. regulators. The Federal Aviation Administration signed off on the software, known as MCAS, which relied on a reading from a single sensor. The redesigned version will compare data from two vanes and will only kick in a single time if it senses a Max is in danger of stalling.

‘Geopolitical’ Issue

While the FAA will conduct the initial review and certification of the system, other regulators are determined to do their own analysis of the software and pilot training proposed by Boeing.

“This is no longer an aeronautical and technical issue, it is a geopolitical and policy issue,” said Robert Mann, an aviation consultant and aerospace engineer. “It’s a fight over the primacy of who will be the gold standard for certification for both new programs and derivative aircraft programs.”

--With assistance from Tony Robinson.

To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Kevin Miller, Ros Krasny

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