How Boeing and the FAA Plan to Restore Public’s Faith in 737 Max

(Bloomberg) -- After two deadly crashes in five months, Boeing Co. is embarking on a campaign to restore confidence in the 737 Max so that its best-selling jet can return to the skies.

In Renton, Washington, the company is gathering customers and news media Wednesday to walk through the details of a software update designed to help pilots more easily avert conditions that investigators have linked to an October disaster in Indonesia. The stall-prevention software is also under scrutiny in a second deadly crash this month in Ethiopia.

Meanwhile, in Washington, D.C., the Federal Aviation Administration will brief lawmakers on its oversight of Boeing’s fixes to the 737 Max -- and how officials plan to scrutinize safety testing more closely in the future.

The dual engagements underscore the high stakes for the U.S. aerospace giant and its chief regulator. Boeing needs to regain trust from customers, passengers and government officials from Washington to Beijing after a crisis that has badly tarnished the revamped version of the 737, its most profitable aircraft program. The FAA is defending its oversight of the 737 Max’s development and certification, even as it prepares to order safety fixes.

“It was a huge wakeup call for both Boeing and the FAA,’’ said Richard Healing, a former member of the National Transportation Safety Board, who is now a safety consultant. “The question is whether or not they can actually convince everybody that they’ve done it right this time.’’

The global ban on Max flights is weighing on Boeing’s customers. Southwest Airlines Co., the plane’s largest operator, said Wednesday that the grounding would combine with soft leisure demand to shave $150 million from first-quarter revenue.

Software Change

The planemaker has developed an update to the Maneuvering Characteristics Augmentation System, according to a company statement late Tuesday. A preliminary report last year about Lion Air Flight 610 indicated that MCAS forced the nose down repeatedly before the 737 Max 8 plunged into the Java Sea on Oct. 29. The crash killed 189 people.

Boeing submitted a proposed certification plan for the software changes to the FAA on Jan. 21, according to the statement. After trying it out in flight simulators, the company conducted a test flight Feb. 7. That was followed by a “certification flight with the FAA’’ on March 12 -- just two days after Ethiopian Airlines Flight 302 crashed near Addis Ababa, killing 157.

Boeing plans a final submission of the MCAS software update by the end of this week.

Longer Road

It’s possible the changes will get the 737 Max back in the air within weeks, said aviation consultant Robert Mann. There’s a risk that Chicago-based Boeing and the FAA will face a much longer road ahead before the jet, which debuted less than two years ago, can start flying again.

The regulator is reviewing the software updates proposed by Boeing. Officials in China, Canada and the European Union -- who grounded the plane before the FAA -- have signaled that they intend to independently review the changes before restoring flights.

That’s a break from historical precedent, in which aviation regulators in other countries typically follow the FAA’s lead and accept its findings, said Peter Goelz, a former managing director of the NTSB.

“It may mean that there’s a staggered reintroduction of the aircraft into service,” Goelz said. “The FAA is going to have to embark on a mission to restore its credibility with the other regulatory bodies.”

Federal Investigation

Putting the plane back in the air involves not just getting the technical details right. Swirling in the background are a probe by federal prosecutors and Congressional hearings, which start Wednesday at 3 p.m. in Washington before the Senate’s Subcommittee on Aviation and Space.

Then there’s the challenge of winning over a potentially fearful public. Many travelers asked airlines to switch their reservations to planes other than the 737 Max after the Ethiopian Airlines crash and before the jet was grounded.

While Boeing’s software fix appears close to approval by FAA, regulators and the company still need to convince ordinary passengers that it’s safe, said Mark Gerchick, a Washington lawyer who previously served as the FAA’s general counsel.

“It has to be pretty definitive,’’ Gerchick said. “People have to say, ‘Ah, I get it.’ It’s a question of public confidence.’’

Also looming is the accident investigation in Ethiopia. Investigators have yet to publish a preliminary report. If new facts emerge, they could complicate the plane’s future.

Airbus Gains

While the 737 Max faces an uncertain outlook, there’s still plenty of enthusiasm on Wall Street for Boeing even after the 12 percent share decline since the Ethiopian crash.

Citigroup Inc. resumed coverage of the company with a buy recommendation. Analyst Jonathan Raviv sketched out a path to $500 from Tuesday’s closing price of $370.38, based on the assumption of a 737 Max grounding that lasts months and ends with “a manageable fix.” But he also warned of a low-probability risk that the shares would fall to as low as $220.

With the software update, Boeing has “an opportunity to reassure the market that this product will be exactly what was promised, with some minor modifications and training procedure changes,’’ said Richard Aboulafia, an aerospace analyst at Teal Group. “But they have to explain it all very carefully and very transparently.”

Boeing developed the 737 Max as an answer to Airbus SE’s success with the A320neo, an upgraded version of the European planemaker’s workhorse jet. Even in a best-case scenario for Boeing, the 737 Max will be playing catch-up to the Airbus model for a long time to come.

“The program will survive and it will be a player, but is it the A320neo’s equal?’’ said Aboulafia. “The question of whether it returns to be the A320neo’s equal depends on how they handle this.”

--With assistance from Ryan Beene.

To contact the reporters on this story: Alan Levin in Washington at alevin24@bloomberg.net;Mary Schlangenstein in Dallas at maryc.s@bloomberg.net;Richard Clough in New York at rclough9@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson

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