Journal of Organizational Behavior Education 8.
2015 NeilsonJournals Publishing.
The Boeing Company: The Grounding of
the 787 Dreamliner
Andres Carrillo, Lauren Harville, Daniel Portilla, and
James S. O’Rourke
University of Notre Dame, USA
Abstract. On January 16, 2013, Boeing had its newest and most advanced aircraft, the 787
Dreamliner, grounded worldwide due to fires that started in the airplane's batteries. The Lithium-Ion
technology installed on the 787 aircraft was a new feature used in commercial aircraft as a solution
to save weight. Several prior delays had already affected the introduction of the Dreamliner 787, one
of the most revolutionary planes to date. Boeing is faced with high demand, costs, and pressure to
respond quickly, while responding to both safety concerns and general industry concerns and loss
of revenue.
Keywords: production delays, lithium-ion batteries, extended supply chain, stakeholder interests,
production costs, investor confidence, market disruption.
1. Introduction
Though January, 2013 hadn’t even come to an end yet, Jim McNerney, CEO of
The Boeing Company was already experiencing a bad year. For more than half the
previous decade, Boeing had invested heavily in its new flagship airplane, the
Boeing 787 Dreamliner. Problems with the production and assembly of the
aircraft had delayed its initial delivery but its long expected arrival to the market
had finally come by the end of 2011. Less than two years later, the 787 had once
again become the source of McNerney’s headaches.
As McNerney prepared for the earnings conference call scheduled for January
30, he wondered how he would respond to the unavoidable questions that would
arise regarding the 787 Dreamliner. The aircraft had become the center of
attention after a series of incidents that culminated with the emergency landing of
an All Nippon Airways 787 Dreamliner and the subsequent mandatory grounding
of all 787 models in the U.S. and other jurisdictions.
Investigating causes for the fires had become Boeing’s top priority. Neither
the company nor regulators had made any headway identifying the exact reason
for the problem, even if there were good reasons to implicate the Lithium-Ion
batteries. The model’s safety was being questioned and the market had not
responded kindly. He had to decide whether to continue producing a product that
was likely to be faulty. He knew the impending conference call would be full of
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2
The Boeing Company: The Grounding of the 787 Dreamliner
tough questions about the fires. He also knew that his response and decisions
about current production would be critical in shaping the public’s response. It
seemed that with every passing day, the Dreamliner was becoming more and
more of a nightmare.
2. Sequence of Events
The bad news started on Jan. 7, followed quickly by a series of other events:
1. January 7: Fire on a Japan Airlines Dreamliner in Boston. The
incident occurred while the plane was grounded and no passengers
were on board. The battery was found to be the source of the fire. It
took firefighters 40 minutes to extinguish the flames.
2. January 9: All Nippon Airways (ANA) canceled a domestic flight to
Tokyo after a computer wrongly indicated that there was a problem
with 787’s brakes.
3. January 11: Separate inspection started on a Japan Airlines flight
that leaked fuel in Tokyo’s Narita airport, after flying back from
Boston, where it also leaked fuel.
4. January 11: A cracked windscreen on another 787 cockpit was also
reported.
5. January 16: Smell of smoke on board an ANA flight from Ube to
Tokyo. Fire started while the plane was taking off; the plane was
rerouted to make an emergency landing in Takamatsu. All 137
passengers and crew were evacuated. One elderly passenger mildly
injured his hip while descending through the emergency rafts on the
side of the plane. No other passengers or crew were injured.
Groundings:
6. January 16: ANA voluntarily decides to ground all 17 of their Boeing
787s. Japan Airlines does the same its seven Dreamliner.
7. January 16: FAA decides to ground all 787 Dreamliners present in
the U.S. Acknowledging that the fire had started in the battery section
of the aircraft, the FAA specifically states that all 787 Dreamliners
would be grounded until the safety of the batteries could be proven.
Journal of Organizational Behavior Education 8
3
8. January 17: European Aviation Safety Agency and Indian aviation
authority order grounding of all 787s in their jurisdictions and four
other agencies follow suit. Chilean LAN airlines voluntarily decides
to do so as well. Only Poland’s national carrier LOT continues to fly
one of their two 787s. The other is stranded in Chicago.
3. The History of Boeing
Boeing draws its history from 1910 when William Boeing bought a shipyard in
Seattle. This would later become his first airplane factory. In 1916 Boeing
became incorporated as a company. From the beginning, the company served
both commercial and defense segments. Boeing grew throughout the years by
serving both segments and after signing a contract with the U.S. Postal Service,
it created its most popular commercial plane to date: the 737. In 1997, the Boeing
Co. merged with McDonnell Douglas Corporation, making it the biggest aircraft
manufacturer in the world.1
Today, Boeing employs more than 170,000 people worldwide.2 It has
produced roughly 75% of the world’s fleet of commercial jetliners, which
amounts to nearly 12,000 aircraft. More than 80% of all Boeing jetliners have
been ordered by non-U.S. customers, making Boeing a truly global company.3
Additionally, their customers are divided between commercial at roughly 55.3%
and defense at roughly 44.7% (2011 data).4
4. The 787 Dreamliner
4.1. The Creation
During the late 1990’s Boeing envisioned a truly progressive change to the
aircraft market and began to produce the fastest commercial aircraft ever. In
2001, Boeing initiated work on the Sonic Cruiser. After they began production,
the September 11th terrorist attacks put a halt on manufacturing. Shortly
thereafter, the airline industry plummeted as oil prices rose dramatically. Boeing
1.
2.
3.
4.
“Boeing History, Chronology”. Boeing.com. Retrieved Feb.15, 2013.
<http://www.boeing.com/history/chronology/index.html>
“Boeing About Us”. Boeing.com. Retrieved Feb. 15, 2013.
<http://www.boeing.com/companyoffices/aboutus/>
“Boeing International, Presence and Patrnerships”. Boeing.com. Retrieved Feb.15, 2013.
<http://www.boeing.com/aboutus/international/partners.html>
“Defense News - Top 100 for 2011”. DefenseNews.com. Gannett Government Media
Corporation, 2013. Web. Feb. 15, 2013
<http://special.defensenews.com/top-100/charts/rank_2011.php>
4
The Boeing Company: The Grounding of the 787 Dreamliner
realized that in this new market, costs were more important than speed and thus
decided to put an end to its Sonic Cruiser project. Using the technology
developed during this period of time, however, Boeing began production one
month later on the Dreamliner 787 (then known as the 7E7), a real game changer.
The plane is thought of as “revolutionary” for many reasons. For one, the 787
aims at being the most fuel-efficient commercial aircraft, for which reducing
weight was extremely important. Some 50% of the airplane is made of carbonfiber composites, a material stronger, 20-30% lighter than aluminum and less
likely to corrode.5 Weight was also reduced by using lighter weight lithium-ion
batteries instead of the standard nickel cadmium design. As if reducing weight
and thus boosting fuel efficiency weren’t enough, Boeing also reinvented the
manufacturing process.
Contrary to how the aircraft manufacturing process usually works, 70% of the
787s component parts were outsourced to some 900 subcontractors all around the
world.6 After production, the parts are shipped back to the United States where
Boeing assembles the aircraft. This cuts assembly time by 75% to three days and
many have compared the process to the innovations of Toyota with their lean
operations model and Ford with its Model T assembly line.7 Though there are a
number of benefits to this process, disadvantages quickly became apparent. For
one, if at any point in time the company would run into problems in the
manufacturing process, the source would prove harder to pinpoint. Secondly, the
problem resolution procedure would likely take longer and would fall outside of
Boeing’s hands, as changes would have to be made at the subcontractor level and
within operations that weren’t under Boeing’s direct control.
4.2. Popularity and Delays
As word emerged that Boeing planned to produce a lightweight, fuel-efficient
carrier, orders began pouring in before a single 787 had ever been assembled.
Unfortunately, Boeing had several issues along the manufacturing process that
led to repeated and continuous delays. Although the model was scheduled to take
its first flight by the end of August 2007, the company anounced in December
2006 that the aircraft that had been built were overweight and the company would
delay the first flight.
5.
“787: Game Changing Innovation”. (Video) Boeing.com. Boeing, n.d. Web. Retrieved Feb.
15, 2013.
<http://www.boeing.com/stories/videos/vid_02_787.html>
6. Ewalt, David M. “Dreamliner Flew Thanks to Lowered Safety Standards”, Forbes. Forbes
Magazine, Jan. 28, 2013. Web. Retrieved 13 Feb. 2013.
<http://www.forbes.com/sites/davidewalt/2013/01/28/dreamliner-flew-thanks-to-lowered-safetystandards/>
7. Gates, Dominic. “Boeing 787: Parts from around World Will Be Swiftly Integrated”,
SeattleTimes.com. Seattle Times, Sept. 11, 2005. Web. Retrieved 8 Feb. 2013.
<http://seattletimes.com/html/businesstechnology/2002486348_787global11.html>
Journal of Organizational Behavior Education 8
5
Following the initial delay, the company faced significant problems due to its
highly outsourced supply chain, an ongoing shortage of fasteners, lack of
documentation from foreign suppliers and problems with the flight guidance
software. In 2007 the Dreamliner’s program manager was replaced. A Boeing
statement issued in January 2011 acknowledged “We made too many changes at
the same time – new technology, new design tools and a change in the supply
chain – and thus outran our ability to manage it effectively for a period of time.”8
Following a series of seven delays, the first flight was moved from August 2007
to December 2009 and Boeing delivered the first 787 in September 2011, more
than three years behind schedule.
Yet none of the interruptions was due to malfunctions and this situation did
not stop orders from continuing to pile up. Boeing received more than 600 before
the first 787 was assembled in 2007 and more than 800 before the first airframe
took flight.9 Moreover, and despite all the delays, Boeing remained confident in
its progress. In December 2012, Boeing CEO Jim McNerney said, “We’re having
what we would consider the normal number of squawks on a new airplane,
consistent with other new airplanes we’ve introduced.” He continued comparing
the number of problems with what the aircraft manufacturer faced in the 1990s
after introducing the Boeing 777.10
Since the first 787 was delivered in 2011, there had been no reported
incidents onboard any of the aircraft. The model’s popularity was outstanding and
by January of 2013, Boeing had 848 orders from commercial airlines all around
the world. The company had struggled at first but until the series of 2013
incidents, everything seemed to be going well.
5. Customer Responses to the Grounding Order
At the time of the grounding, eight airlines counted 787 Dreamliners among their
fleets. ANA and Japan Airlines owned 24 of the 49 delivered so far. The other
8. Reuters, “Boeing Says Learned From Outsourcing Issue with 787”, Jan. 20, 2011
<http://www.reuters.com/article/2011/01/20/boeing-idUSN1916381720110120>
As cited in: Cohan, Peter. “Boeing’s Dreamliner Delays: Outsourcing Goes Too Far”, Daily
Finance. Jan. 21, 2011.
<http://www.dailyfinance.com/2011/01/21/boeing-dreamliner-delays-outsourcing-goes-too-far/>
9. Press release, “Boeing Celebrates the Premiere of the 787 Dreamliner”, Boeing
<http://www.boeing.com/news/releases/2007/q3/070708b_nr.html> and “Orders and Deliveries”,
Boeing.com. Boeing, n.d. Web. Retrieved Feb. 14, 2013.
<http://active.boeing. com/commercial/orders/index.cfm?content=timeperiodselection.cfm&
pageid=m15523>
10. Spira,
Jonathan
“Boeing:
Problems
with
787
Dreamliner
‘Normal’”,
FrequentBusinessTraveler.com. N.p., 16 Dec. 2012. Web. Feb. 9, 2013.
<http://www.frequentbusinesstraveler.com/2012/12/boeing-problems-with-787-dreamlinernormal/>
6
The Boeing Company: The Grounding of the 787 Dreamliner
operators were Air India, Ethiopian Airlines, Chile’s LAN Airlines, Poland’s
LOT, Qatar Airways and United Airlines.
Ten days after the initial grounding, more than 1,000 flights worldwide had
been cancelled.
ANA had cancelled 459 flights since January 16, affecting more than 58,000
passengers. The airline either used substitute planes or rebooked passengers,
incurring heavy logistical and financial costs.11 The airline estimated that the 787
grounding would reduce its revenue for January by $15.4 million.12
To Boeing’s good fortune, most of the company’s customers had so far
decided to back the company and had publicly expressed their support.
After a meeting with the Japanese transport minister, ANA Chief Executive
Shinichiro Ito, told reporters “we are not in a situation where we should change
the strategy we have been pursuing.”
United’s chairman, Jeffery A. Smisek, considered the fuel efficient 787
“terrific” and added that he believed Boeing would come up with a solution soon.
The spokesperson for Qantas Airways Ltd. said the company was “confident” the
problems would be resolved before it took its first deliveries in the second half of
2013, while state-run Air India said its six Dreamliners were operating normally.
Only Polish airline LOT was not so supportive as its officials said they would seek
compensation from Boeing.13
Despite these supportive announcements, many believed that, in private,
airline executives were becoming increasingly nervous since the exact cause for
the problems had not been determined. Polish LOT had already threatened
Boeing with a lawsuit and McNerney feared that other airliners would follow in
their step.
6. Market Responses
The market had mixed feelings concerning the 787’s grounding. On one hand,
Boeing’s stock had been punished by the stock market, seeing a 2.5% decrease
only five days after the initial grounding order and shedding a total of $1.5 billion
in market cap. On the other hand, there had been no changes in flight reservations
in Japan or anywhere else. To Boeing’s good fortune, it seemed that passenger
11. Mouawad, Jad and Christopher Drew “787’s Grounding Leaves Airlines with Uncertainties”,
New York Times, Jan. 25, 2013. <http://www.nytimes.com/2013/01/26/business/787sgrounding-leaves-airlines-with-uncertainties.html>
12. Waldron, Greg “ANA 787 Grounding to Cost $15m in January Revenue”, Flight Global, Jan.
31, 2013. <http://www.flightglobal.com/news/articles/ana-787-grounding-to-cost-15m-injanuary-revenue-381692/>
13. Mouawad, Jad and Christopher Drew “787’s Grounding Leaves Airlines with Uncertainties”,
New York Times, Jan. 25, 2013. <http://www.nytimes.com/2013/01/26/business/787sgrounding-leaves-airlines-with-uncertainties.html>
Journal of Organizational Behavior Education 8
7
bookings hadn’t changed much, as few passengers chose their flights based on the
type of aircraft used and instead selected by airline.
For the moment, it seemed like some of the market shock had been insulated
because Boeing didn’t deal directly with end consumers. Nevertheless, the risk of
a brand boycott due to safety concerns still existed. A frequent flyer was quoted
saying: “If I was going to fly on a Dreamliner for this trip, I would cancel it and
re-book on another flight using ‘proven winner’ airplanes that have a good safety
record.”14 If this trend continued, Boeing would begin facing very serious issues.
Persuading Wall Street that the company’s balance sheet would remain
unscathed was likely to be difficult. Boeing’s inability to deliver new planes
resulted in no new payments; meanwhile, the world’s largest plane maker had to
maintain and buy insurance for parked planes. The longer the battery problem
remained unsolved, the more expensive the fix would be, and the more it would
hurt Boeing’s cash flow. The company’s $3.7 billion in free cash flow generated
in the fourth quarter of 2012 helped, but that and its $13.5 billion in cash and
short-term investments could be threatened each month the plane was
grounded.15
7. Relationships with Employees and Sub-Contractors
Boeing was also spending about $1 billion a month to keep production lines
running. The company would have to be clear to employees about possible
layoffs in the event of a production slowdown or stoppage. Boeing would also
need to develop a strategy to enforce if the assembly line for the 787 were halted.
In addition, Boeing was expected to pay for engineers to work on the battery
problem and to modify the 100 Dreamliners already produced; Wall Street
analysts estimated those costs at $350 million.16
Creating a highly outsourced plane and using more than 900 manufacturers
to create parts for the plane was an enormous challenge for the company. This
also created a threat to companies supplying parts to the 787 Dreamliner assembly
line; they were especially vulnerable to the grounding of 787 planes and a
possible interruption in the production of the aircraft model. Boeing needed a
game plan to keep its providers in business while the glitches in the 787 were
fixed.
14. Jansen, Bart “FAA Grounds Boeing Dreamliner Jets”, USA Today, Jan. 17, 2013. <http://
www.usatoday.com/story/travel/flights/2013/01/15/boeing-dreamliner-787-emergencylanding/1837943/>
15. “Boeing Cash Drain Worries Grow as Dreamliners Remain Grounded”, Financial Post and
Reuters, Feb. 20, 2013. <http://business.financialpost.com/news/transportation/boeing-cashdrain-worries-grow-as-dreamliners-remain-grounded>
16. Ibid.
8
The Boeing Company: The Grounding of the 787 Dreamliner
8. Relationships with Other Airlines
With the 787 Dreamliner out of service, carriers faced a financial burden of
finding other planes to complete routes, or by redrawing or canceling routes.
United, for example, had six 787s among its fleet of 700 planes.
The 787’s lower fuel consumption and better long-haul ability rendered it
very difficult to replace. Industry analyst Robert Mann estimated that airlines
flying the Dreamliner would lose $2.5 million per aircraft for every month the
plane was grounded.17 The airline with the largest fleet of 787s (ANA had 17 of
them) would take an ever larger hit.
LOT, the Polish airline already seeking compensation from Boeing, said it
would accept delivery of three previously-ordered 787s only if the battery
problem were resolved.18
9. Possible Causes
Although investigators weren’t sure about the exact cause of the fires, both the
Japan Airlines and ANA fires had started in the battery section of the 787s.
Furthermore, Lithium-Ion batteries, the batteries employed in all 787 models had
a reputation for being prone to overheating and, as a consequence, causing fires.
Thus, although the exact causes remained a mystery, the batteries were targeted
as the likely culprits, as shown by the FAA’s initial grounding order.
9.1. The Lithium-Ion Battery
The Lithium-Ion (Li-ion) battery provides several advantages compared with
other types of cells. It has a high energy density, which is typically twice that of
comparable nickel cadmium units. In addition, the higher cell voltage allows
battery packs to be designed with significantly fewer cells connected in series.
They are lighter, and low maintenance. They have no memory effect (taking less
and less charge with every recharge) and have very low self-discharge rates.
But some of the Li-ion battery’s greatest drawbacks come from the unstable
nature of Lithium. This translates into a tendency for them to overheat. To
aggravate this, if Li-Ion cells are overcharged, physically damaged or allowed to
get too hot, they may experience thermal “runaway,” a phenomenon in which a
positive feedback loop leads to the creation of heat within the cell at a faster rate
than can be dissipated, often with catastrophic results.19
17. White, Martha C. “Is the Dreamliner Becoming a Financial Nightmare for Boeing?”
Time.com, Jan. 17, 2013 <http://business.time.com/2013/01/17/is-the-dreamliner-becominga-financial-nightmare-for-boeing/?
18. Ibid.
Journal of Organizational Behavior Education 8
9
9.2. Li-Ion Batteries and the 787 Dreamliner
Boeing has gone to great lengths to make the Dreamliner lighter, more efficient
and easier to build. One such innovation comes from the complete redesign of
aircraft systems. The Dreamliner is the first aircraft to completely remodel its
hydraulic and electric configurations, as well as most other in-flight systems.20
Heavily dependent on electrical power and more so than any other commercial
jet, the 787 boasts two 32 Volt battery packs, consisting of eight Li-Ion cells each.
However, due to the instability often associated with this type of high-power
battery, the FAA required Boeing to install four separate layers of protection in
the 787 to prevent short-circuits in any of the individual cells, as well as guarding
them from heat generated in contiguous cells. (Exhibits A and B)
Compared to a more traditional Nickel Cadmium power source, Li-ion
provided a weight advantage for the 787 Dreamliner of about 40 lb., or about the
same as a single piece of luggage. However, redesigning the existing battery
system to incorporate a different type of battery would ground the existing 787
fleet for as long as a year, pending FAA approval.21
10. Boeing, the FAA and the NTSB
The Federal Aviation Administration or FAA is the agency authorized to regulate
and oversee all aspects of civil aviation in the United States. A branch of the
United States Department of Transportation, the FAA is in charge of regulating
and creating all pertinent standards for the U.S. airspace, while encouraging and
developing civil aeronautics and new aviation technology. The investigation of
transportation accidents however, falls to a separate and independent agency
called the National Transportation Safety Board, (NTSB).
As the largest aircraft producer in the U.S., Boeing’s relations with both the
FAA and the NTSB are constant and tumultuous at times. In the case of the 787
Dreamliner, several of the delays in the design and early production phases were
caused by compliance issues with FAA standards and regulations. On the other
hand, since Boeing is the dominant aircraft producer in the U.S., the FAA has also
been accused of playing favorites with them. According to Reuters, the FAA
granted the 787 special conditions, knowing that the batteries could cause
problems and saying that existing contain-and-vent systems would be enough to
19. “Difference Engine: An Innovation Too Far?” The Economist, Jan. 28, 2013. By N.V. Los
Angeles. <http://www.economist.com/blogs/babbage/2013/01/lithium-batteries>
20. Sinnett, Mike “787 No Bleed Systems: Saving Fuel and Enhancing Operational Efficiencies”,
Aero Magazine. The Boeing Company. Quarter 4, 2007. <http://www.boeing.com/
commercial/aeromagazine/articles/qtr_4_07/article_02_1.html>
21. “Difference Engine: An Innovation Too Far?” The Economist, Jan 28, 2013. By N.V. Los
Angeles. <http://www.economist.com/blogs/babbage/2013/01/lithium-batteries>
10
The Boeing Company: The Grounding of the 787 Dreamliner
control the buildup of explosive or toxic gases created in the event of a battery
bursting into flames.22 Other instances in which the FAA might have sidestepped
processes to Boeing’s advantage have been mentioned, but none have been
properly documented.
11. History of Mechanical Failures in the Airline Industry
According to one reliable source, only 13 percent of all commercial plane
accidents have been due to mechanical failures, and most of those were due to a
failure of ground crews to properly inspect, replace or maintain parts.23 “The
constant maintenance and repair of aircraft may seem like a trivial job, but they
can prove to be fatal if not done properly,” writes Cyril Sudip, Fourth Engineer
Officer for American Eagle Tankers, a Malaysian-owned global shipping
company. “A missing screw can jeopardize the whole aircraft.” 24
PlaneCrashInfo.com, an online, copyrighted database, estimates that around
20 percent of commercial airline crashes are due to mechanical failure (see Table
1. below). Most crashes (53 percent of all crashes) are caused by pilot error. The
figures below represent 1,015 fatal accidents involving commercial aircraft from
1950 to 2010, where causes are known. Smaller aircraft (18 or fewer passengers),
military aircraft, private aircraft and helicopters are not included in the statistics.
Source: PlaneCrashInfo.com <http://www.planecrashinfo.com/cause.htm
Prior to the 787 Dreamliner grounding, the last time the FAA issued this type
of order was in May of 1979,25 after a crash that killed 273 people in Chicago
(Flight 191). As a result of the crash, the FAA grounded all McDonnell Douglas
22. Scott, Alwyn and Saito, Mari “Insight: Boeing 787 Battery Woes Put FAA Approval under
Scrutiny”, Reuters, Jan. 22, 2013 <http://www.reuters.com/article/2013/01/23/us-boeing-787faa-idUSBRE90M04620130123>
23. Sudip, Cyril “Aviation Disasters Due to Mechanical Failures”, Slideshare seminar, March 20,
2009. <http://www.slideshare.net/silvercyril/aviation-disasters-due-to-mechanical-failures>
24. Ibid.
Journal of Organizational Behavior Education 8
11
DC-10s, including the DC-10-10, the DC-10-30 and the DC-10-40, and
suspended the aircraft’s Type Certificate.26 The grounding lasted 37 days. With
270 DC-10s in service, passengers in the U.S. and abroad felt the effects,
especially since the crash occurred during a busy summer season.
Cracks found in the aft bulkhead forward flange of two American Airlines
DC-10s led investigators in that direction, and it was later determined that the
Flight 191 crash was due to an improperly repaired engine mount. McDonnell
Douglas pushed back – to no avail – on the suspension of all DC-10s by saying
that the problem with bulkhead cracks was only with the DC-10-10 and not the
DC-10-30 or DC-10-40.27
Within the past five years, the FAA has also ordered emergency inspections
(but no groundings) on two other commercial airline types, although neither of
them were for brand new roll-outs:
• In early April, 2011, after a Southwest Airlines jet was forced to make
an emergency landing in Yuma, Arizona when the roof ripped open
while in flight. The order targeted 175 Boeing 737 aging jetliners,
worldwide, known to accumulated more than 30,000 takeoffs and
landings. Southwest, which operated 80 of the aircraft, had to cancel
nearly 700 flights in a three-day period.28 As a result of the inspections,
Southwest found five more planes with similar signs of metal fatigue.29
Boeing issued more guidance to airlines on how to check affected
airplanes in service.30
• In March, 2010, after a Ryanair plane experienced “severe vibration”
while in flight from the Netherlands to Spain. Inspections were ordered
for about 600 Boeing 737s, all assembled around the same time as the
25. Ostrower, Jon; Pasztor, Andy; and Koh, Yoree “All Boeing Dreamliners Are Grounded
World-Wide”, The Wall Street Journal, Updated Jan. 17, 2013.
<http://www.wsj.com/articles/SB10001424127887323783704578246213461653662>
26. McGee, Bill “What Happens When Your Plane Is Grounded?” special for USA Today, Jan.
30, 2013.
<http://www.usatoday.com/story/travel/columnist/mcgee/2013/01/29/what-happens-when-yourplane-is-grounded/1874631/>
27. North, David “DC-10 Type Certificate Lifted”, Aviation Week and Space Technology, June 11,
1979. <http://awin.aviationweek.com/Portals/aweek/media/DC-10/DC-10-1.html>
28. Christie, Bob, and Lowy, Joan “FAA Requires New Safety Inspections of Boeing 737s”,
Associated Press and San Diego Union Tribune, April 5, 2011.
<http://www.sandiegouniontribune.com/news/2011/apr/05/faa-orders-inspections-of-737s-withmany-landings/>
29. Raedle, Joe “FAA Orders Emergency Inspections Of Boeing Jets”, CBS News, April 5, 2011.
<http://www.cbsnews.com/news/faa-orders-emergency-inspections-of-boeing-jets/>
30. Christie, Bob, and Lowy, Joan “FAA Requires New Safety Inspections of Boeing 737s”,
Associated Press and San Diego Union Tribune, April 5, 2011.
<http://www.sandiegouniontribune.com/news/2011/apr/05/faa-orders-inspections-of-737s-withmany-landings/>
12
The Boeing Company: The Grounding of the 787 Dreamliner
Ryanair 737. Specifically, the inspections targeted loose elevator tabs
on 600, 700, 800 and 900 series aircraft of the model. 31
12. The Earnings Call
Jim McNerney had successfully appeased previous market concerns regarding the
787. But this time, he was worried that things could get out of hand. He had been
comfortable thus far comparing the 787 to other aircraft models, ensuring the
public that the delays and issues were nothing more than teething problems.
On the inside, however, he wasn’t sure whether this was the case anymore.
Unfortunately, there would be no way for him to know until the NTSB figured out
what the real problems were. He felt as if he were swimming in an ocean of
uncertainty and his hands had been tied behind his back.
He had to make big decisions regarding whether he would go ahead with the
production increase of five to 10 airplanes per month or whether he would slow
or halt production. Furthermore, he would have to deal with the earnings call
knowing little more than anyone else. The earnings call, he knew, would be
crucial for Boeing’s reputation and he needed to address it smartly.
Discussion Questions
• How might this incident influence future public opinion and regulatory
actions if another issue arises with the 787 Dreamliner?
• How should Boeing respond to growing pressure from airlines, both in
delivering new orders and finding a solution for the aircraft that have
already been delivered to customers?
• How should Boeing respond to organizations that have been affected
by the delays in the 787 Dreamliner, and how can they deal more
effectively with any further issues arising from the aircraft in the
future?
• What long-term implications might this incident have on Boeing’s
reputation?
31. Ng, Jansen (Blog) “FAA Orders Emergency Inspections of 600 boeing 737 Aircraft”, Daily
Tech, March 15, 2010. <http://www.dailytech.com/FAA+Orders+Emergency+Inspections+of
+600+Boeing+737+Aircraft/article17893.htm>