Plane Parts Are Falling From the Sky. Is Boeing to Blame?
(Bloomberg Opinion) -- It’s never helpful for the aviation community when fiery debris falls from the sky onto a large U.S. city. But some perspective is warranted on this weekend’s incident involving a United Airlines Holdings Inc.-operated Boeing Co. 777 jet. This isn’t on par with the crisis that engulfed another Boeing plane, the 737 Max, after two fatal crashes led to its grounding for almost two years. Not even close.
United Airlines Flight 328 was meant to fly from Denver to Honolulu on Saturday, but the engine failed shortly after takeoff. An initial examination by the National Transportation Safety Board indicates fractures in two of the fan blades in the engine, which was manufactured by Raytheon Technologies Corp.’s Pratt & Whitney arm. The United flight scattered debris on nearby homes, but miraculously no injuries have been reported so far. The 777 model has two engines and can fly even if one fails; pilots are trained to handle an in-flight engine failure and, in this case, landed the United plane safely back at the airport. In the wake of the incident, Japan’s transport ministry grounded 777 models with the Pratt engine variant, and the Federal Aviation Administration recommended emergency safety inspections. The U.K. also suspended flights of Pratt-powered 777 jets, and European regulators said they were reviewing the matter.
Boeing quickly issued a statement supporting the regulatory actions and recommending airlines temporarily cease operation of the planes. That alone is a distinct difference from the 737 Max crisis. In 2019, after the second fatal crash in five months, former CEO Dennis Muilenburg reportedly called former President Donald Trump to insist that the Max was safe and that the FAA shouldn’t ground it. The regulator ultimately grounded the Max anyway and kept it out of the skies for some 20 months, demanding multiple fixes to the plane’s engineering and software. The Max returned to service late last year. In all, 346 people died in the two crashes.
The Max was a relatively new airplane, having completed its first flight in only 2016, and the engineering flaws that caused the two crashes were the result of miscalculations by Boeing and a less-than-rigorous approval process at the FAA. While everyone wishes those flaws had been discovered earlier, the problems came to light relatively quickly. The 777 jet operated by United, in contrast, made its debut in 1995. Any systemic issues with the design of this plane should have been unearthed by now, and it's extremely unlikely this latest incident is Boeing’s fault. There's no evidence to suggest any issues with the 777 model outside of the engines.
There are some tough questions for Pratt & Whitney. The crack that led the fan blade to break in this weekend’s engine failure is similar to a separate incident on a United plane in 2018, a person familiar with the preliminary investigation results told Bloomberg News. The NTSB had tied the prior episode to inadequate test standards at Pratt, and the engine maker has said it took corrective actions, including reinspecting all 9,600 fan blades. It's too early to say exactly went wrong, but regulators will likely focus on the possibility that something got missed somewhere along the way, either at inspection or during maintenance. But Pratt isn't the only engine supplier for the older 777 models, and it doesn't make the propulsion systems for the newest version of the Boeing wide-body jet. Boeing granted an exclusive contract to rival engine manufacturer General Electric Co. in 1999.
The United incident adds another asterisk to the broader 777 program, which was already under pressure because the pandemic has sapped demand for long-range flights that require the ample seating capacity offered by that plane. It’s telling that there are nearly as many 777s with Pratt engines sitting in storage right now (59) as there are in service (69). Should the required repairs prove costly, the airlines that fly older Pratt-powered 777 models may be more likely to consider permanently retiring the jets. That would starve Pratt & Whitney of maintenance revenue, but in a weird way, such a culling may benefit Boeing in the long term. Long-range jets are out of style right now, but they are still flying. United’s decision to fly the plane to Honolulu — a key destination in a leisure travel market that’s bounced back faster than more business-oriented trips — is notable. International travel is likely to be last in line for a rebound to pre-pandemic levels, but it will come back.
If airlines retire a swath of older 777 jets, they are going to need replacements eventually, and Boeing would be only too happy to provide those — if it can. The company is rolling out the latest edition of the 777 family, the 777X. Between the pandemic and a more rigorous FAA review process in the wake of the Max crisis, Boeing doesn’t expect to make its first 777X delivery until 2023, three years behind the initial schedule. Gulf carrier Emirates — the largest 777X customer — is reportedly considering switching as much as a third of its order to the smaller 787 Dreamliner. The Dreamliner has had problems of its own: Boeing hasn’t shipped one of the planes since October as the company works with regulators to address tiny wrinkles in the carbon-fiber frame that could lead to premature aging. Boeing investors should worry more about those issues than the United incident.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.
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