boeing case study solution

[Solved] Boeing 7E7 Case Study Solution: WACC Calculations and Answers to 7 Questions

Boeing 7E7 Case Study Solution

The Boeing 7E7 Case Study is a case study from HBR . The Case be analyzed from the perspective of new product introduction, financial estimations for Weighted Average cost of accounting (WACC), IRR (internal rates of Return), and NPV (Net Present Value). The case presents an opportunity to undertake a financial analysis and project viability document for New Product Introduction.

For Solutions to more cases like Boeing 7E7 Case Study, follow our case studies archive

Boeing 7E7 Case Study: Introduction

In 2003, Boeing announced their intention to create a new “super-efficient” commercial jet codenamed “7E7” or “Dreamliner.” Similar to when it first developed the 747 and 777, Boeing effectively “bet the farm” on this venture. The new airframe is technologically superior, and it will be sold in a rapidly expanding market, so the project should be greenlit. However, the demand for commercial planes dropped as a result of global travel warnings issued in response to the spread of the highly contagious SARS virus.

The board of directors at Boeing would have to consider all of these factors before giving the project final approval. The Critical task is to determine how the 7E7 project stacks up against a financial benchmark, such as the rate of return sought by potential backers. Internal rates of return (IRR) for the 7E7 project are displayed in the case, both for the baseline scenario and for alternative scenarios. The value of these internal rates of return (IRRs) is determined by students’ estimates of Boeing’s commercial-aircraft business segment’s weighted-average cost of capital (WACC). Students will be able to differentiate between qualitative risks that Boeing is taking and identify “key value drivers” after completing this analysis.

Learning how to calculate the weighted average cost of capital and the cost of equity is the primary focus of this case. The ability to compare beta estimates and use the levered-beta formulas is essential for students attempting to calculate the WACC of a segment. Boeing faces competition in both the civilian and military aircraft markets. The commercial aircraft division of Boeing’s overall corporate WACC must be isolated to determine an appropriate benchmark WACC for the 7E7 project. In this way, the concept of adding value to something is introduced to the students.

Boeing 7E7 Case Study Solution: Why is Boeing contemplating the launch of the 7E7 project? Is this a good time to do so?

As a result of the available technology, Boeing is considering beginning the 7E7 project. Boeing’s main rivals claimed that the 7E7 was an engineer’s nightmare but a salesperson’s paradise. Carbon-reinforced materials, which are stronger than regular aluminum, will be used extensively in the construction of this project, making it the first commercial aircraft of its kind.

However, the threat of rivalry must also be considered. When a brand-new airplane hits the market, it’s bound to sell like hotcakes at first, but competitors taking the plunge to try to replicate 7E7’s success would be foolish. Both Boeing’s asking price and the number of 7E7 planes it could sell were constrained by the lack of information about the plane’s specifications and the threat of competition.

Although Boeing must take chances to maintain its standing in the aircraft industry, now is not the time to launch its project 7E7, in my opinion.

Boeing 7E7 Case Study Solution: Should Boeing’s Board approve the 7E7?

Board members at Boeing should vote to green-light the 7E7 so that the company can continue to compete with Airbus and regain market share in the commercial aircraft sector. There is a scope for undertaking a financial analysis in the Boeing 7E& Case Study, which we will see later.

Boeing 7E7 Case Study Solution: How would we know if the 7E7 project will create value?

In capital budgeting, NPV is used to evaluate a project’s or investment’s profitability. It does this by looking at the future value of a dollar and comparing it to its value right now. According to the case and Boeing’s Market Outlook, NPV is a short-term metric, making Project 7E7 unfavorable. The negative cash flows are another reason why this project should be rejected.

Examine the details of how to estimate the WACC :

WACC = (Wdebt)(rd)(1-tc) + (Wequity)(re)

• Wdebt = proportion of debt in a market- value capital structure
• rd = pretax cost of debt capital
• tc = marginal effective corporate tax rate
• Wequity = proportion of equity in a market-value capital structure
• re = cost of equity capital
• From Exhibit 10 : Debt / Equity ratio= 0.525

Tc = 0.35 (From page 237)

• From Exhibit 2, Wdebt = 44646 / 129686 = 0.344

Wequity = 85040/129686 = 0.656

• From Exhibit 11, Rd is calculated as below which is 5.335%

The cost of equity capital (re ) will be calculated using CAPM. re = Rf + β*E(Rm)

BetaAsset = BetaEquity / [1+(1-tc)D/E]

Beta Equity Boeing =1.62Market-value debt/equity ratio = 0.525BetaAsset = 1.62/[1+(1-0.35)0.525] = 1.21

• Exhibit 10 indicates the percentage of revenues derived from government for Lockheed Martin and Northrop Grumman is 93% and 91%, which will help to estimate beta asset of defense.
• Debt /equity ratio for Lockheed Martin = 0.410
• Betaasset defense = 0.37/[1+(1-0.35)0.41] = 0.29
• S&P500 60 trading day BetaEquityNG for Northrop Grumman=0.30
• Debt/equity ratio for Northrop Grumman = 0.640
• Exhibit 10, Boeing Rev from Defense (Wdefense) = 0.46
• Boeing Rev from Commercial Sales (Wcommercial) = 0.54
• βBoeing= βcommercial* Wcommercial + βdefense*Wdefense
• 1.21= βcommercial *0.54+0.25*0.46
• β asset commercial =1.095/0.54= 2.03
• β equity commercial =2.031+(1-0.35)0.525=2.72
• re = Rf + β*E(Rm)- Rf]

=0.85%+2.72(8.4%)

WACC= % debt (rd)(1-tc)+ % equity(re)

=0.344*0.05335*(1-0.35)+0.656*0.2370

WACC=16.74%

Boeing 7E7 Case Study Solution: Is there anything else the board of directors should consider in assessing the financial appeal of this project?

There are a few different approaches to calculating the economic viability of the Boeing 7E7 project before making a decision about whether or not to move forward with it. These include the Payback period (which does not account for the time value of money, but is simple to calculate and is based on projects with higher liquidity), as well as the Discount Payback period (which is based on projects with higher liquidity) ( it consider the time value of money).

The Boeing 7E7 was a long-term project that required a significant investment to get off the ground. This is yet another reason why it was delayed. Therefore, more time will be required to accumulate the most wealth and settle all financial obligations. In the event that this is not the case, the money that has already been invested in the project by the board of directors will be wasted.

Boeing 7E7 Case Study Solution: What should the board do?

As the first plane to use carbon body construction and employ wingtip extenders, both of which will add to the level of risk because they have never been used on large-scale projects before, the board should approve the launch of the Boeing 7E7 Project despite the high level of risk associated with the project due to its design. Not mentioning that Airbus is about to introduce their brand new A380 would be negligent of us. Boeing should go ahead with the launch of the 7E7 because it will have a lower fuel requirement and will be able to carry a larger number of passengers.

If you have any questions, reach out to the author

Follow us on Quora

Samrat is a Delhi-based MBA from the Indian Institute of Management. He is a Strategy, AI, and Marketing Enthusiast and passionately writes about core and emerging topics in Management studies. Reach out to his LinkedIn for a discussion or follow his Quora Page

Understanding the behavior of systems is essential for human survival — with Dennis L. Holeman

The Boeing 737 MAX: A Case Study of Systems Decisions and Their Consequences

Revised 3 July 2019

The Boeing 737 MAX program provides an illustrative example of how incentives can shape the behavior of complex technical and economic systems decisions that result in serious problems.  After more than a century as one of the most respected companies in the entire field of aviation, Boeing’s credibility as the builder of safe commercial aircraft has come into doubt. How the 737 MAX will regain the confidence of regulatory agencies, airline customers, and the flying public is an open question at this time.  This article describes the path that brought things to this point  Read Less

The Boeing 737 Family

Boeing designs the 737 starting in 1964 as a short-to-medium range, smaller-capacity member of the Boeing single-aisle jetliner family. It uses the same fuselage cross section, cockpit, and controls technology as the predecessor 707 and 727 aircraft.  The initial seating design (on the 737-100) is for 85 passengers. However, airlines find this aircraft is too small and the first major production version is the lengthened 737-200 with 102 seats in two classes.

Because the 737 is intended to serve secondary airports with less-developed infrastructure (boarding stairs instead of jetways, limited baggage loading and engine servicing equipment, etc.), it is designed with short landing gear to allow the fuselage to sit as low as possible.  The initial engines are small-diameter JT8D low-bypass turbofans, mounted directly under the wings without pylons.

After a somewhat slow sales start, the 737 becomes very popular, eventually becoming the most-produced airliner family in the world (over 10,500 produced).  It supplants virtually all of its early competitors in the smaller jetliner segment (e.g., Douglas DC-9, BAC 1-11, Fokker F28/F50/F100, Sud Caravelle, BAe 146, etc.).

The design is extended to a number of growth versions with different length fuselage stretches.  These include the 737-300, 737-400, and 737-500. The engines selected for the new versions are more powerful CFM-56 high bypass turbofan engines.  To accommodate the larger diameter high-bypass engines while retaining adequate ground clearance, the nacelles are mounted higher and further forward and the nacelles are flattened on the bottom

The biggest change occurs with the 737 Next Generation (737NG) series that features enlarged and redesigned wings, larger fuel tanks for more range, new cockpits, and uprated CFM-56 engines. The 737NG series is first produced in 1996 and includes the 737-600, 737-700, 737-800, and 737-900.

All the new versions are certified by the FAA under the original 737 type certificate, even though the largest 737NG versions of them have nearly three times the original passenger capacity (230 in maximum density), twice the engine power, twice the range, all-digital “glass” cockpits, and serve different market segments than the original 737 design.

Boeing’s largest customer for the 737 family is Southwest Airlines, whose fleet is exclusively made up of 737 variants.  Like a number of Boeing’s other customers, Southwest wants its pilots to be able to fly any 737 version in its fleet with one pilot type certificate and common training.

Origin of the 737 MAX

The Airbus A320 family (A320, A319, A321, and A318) becomes the primary competitor to the 737 family.  First flying in 1987, the A320 is a clean-sheet-of-paper design not tied to previous Airbus aircraft. Because it is not optimized for serving secondary airports, it has a higher stance with plenty of ground clearance to accommodate large diameter engines.  The A320 family sells well.

Airbus introduces the A320 Neo family incorporating new technology ultra-fuel-efficient engines with larger engine diameters.  The A320 configuration accommodates the new engines easily. The first flight is in 2014. With its improved economics, the A320Neo family is very attractive to customers.

In order to avoid losing next generation single-aisle jetliner sales to Airbus, Boeing decides it needs to create a new 737 family with comparable ultra-fuel efficient engines.  This becomes the 737 MAX series. It is closely based on the 737NG family (737-600, 737-700, 737-800, and 737-900).

To be able to install the larger diameter engines on the 737 MAX design, the engine nacelles are moved even further forward and higher than the previous CFM 56 engines.

Selling the 737 MAX Family

Boeing aggressively markets the 737 MAX as being just like the previous 737 variants but much more economical to operate.  It claims essentially no additional training is required for a 737 pilot to transition to flying the 737 MAX. Only an hour or two’s study of instructional material on an iPad is sufficient.  Boeing takes orders for almost 5,000 737 MAX aircraft and sets up to produce about 60 units per month.

737 MAX Flight Characteristics 

Previous 737 models had the center of gravity well forward of the center of lift. In a stall, with neutral control inputs, the plane will nose down and recover on its own.  The natural nose-down force is counteracted by downward lift generated by the horizontal stabilizer. This lift creates drag and increases aircraft fuel burn. It appears that Boeing changed the 737 MAX’s relationship between the center of gravity and center of lift to minimize this trim drag effect and optimize efficiency.

In flight test, the 737 MAX variants are found to have flight characteristics that differ significantly from previous 737s.  This is particularly true at a high angle of attack where body lift from the large engine nacelles mounted ahead of the wings creates a strong nose-up force.  The center of lift shifts forward. The thrust from the low-mounted engines acting below the center of gravity also provides a nose-up force. This latter effect is especially pronounced at high power levels.

Without corrective input, at a high angle of attack a 737 MAX will continue to pitch up further, leading to a stall.  As a result, Boeing finds the 737 MAX design does not satisfy Federal Aviation Authority (FAA) airworthiness criteria for stability, particularly Federal Aviation Regulation (FAR) 25-173 [see appendix].  If the angle of attack of the aircraft exceeds 14 degrees, the nose will rise on its own until the aircraft stalls, unless a corrective action is taken.

Creating a Fix for the Stability Problems 

Rather than doing an aerodynamic redesign of the airplane, Boeing decides the quickest and least expensive fix for the flight characteristics of the 737 MAX is to provide a new software system. Called the Maneuver Characteristics Augmentation System (MCAS), it endeavors to make the 737 MAX aircraft behave like previous 737NG versions through flight control software algorithms.

As a priority, MCAS is intended to prevent the aircraft from getting into a hazardous unstable flight regime.  In addition to traditional pilot warning mechanisms (e.g., a “stick shaker” stall warning system), the MCAS will automatically drive the stabilizer trim to force the nose down when sensor data indicate a dangerously high angle of attack.

Characteristics of the initial design of the MCAS software include the following:

• It electronically manipulates the aircraft horizontal stabilizer trim to increase the lift on the tail to force the nose down
• The sensed angle of attack is above a pre-set value
• The autopilot is off
• Flaps are up (at low altitude and low airspeeds MCAS is also cued to operate with flaps lowered).
• MCAS moves the horizontal stabilizer trim upward at 0.27 degrees per second, up to 9.26 seconds at a time
• Then system pauses for about 5 seconds.  If the sensed angle of attack is still high, the MCAS repeats the process
• The MCAS is supposed to deactivate when angle of attack is sufficiently reduced or pilots cut out power to the stabilizer trim.

A 737 MAX with the MCAS operates in a manner that can be rather disorienting to pilots accustomed to flying earlier 737 models without the software. A pilot may raise the nose by pulling back on the control yoke but then observe the stabilizer trim wheel moving to trim the nose down opposite to his or her input.  This is a result of the aircraft’s computer calculating that the optimum angle of attack for maximum lift is less than the angle which the pilot is demanding through moving the control yoke.

As long as the angle of attack sensor is providing a high signal, the MCAS will drive the trim repeatedly, overriding pilot input.  Note that the nose-down force provided by the stabilizer trim is stronger than the pilot’s ability to counter it by pulling back on the control yoke to raise the elevators.

Recommended Pilot Responses to MCAS Malfunctions

Like any flight control system, the MCAS can malfunction.  There are a number of hardware and software faults that can cause the system to behave incorrectly.

Boeing’s position has been that pilots should respond to an MCAS malfunction as though it were a case of runaway stabilizer trim.  This is a condition that pilots routinely train for in a simulator. The handbook procedure for this problem is to cut off electrical power to the stabilizer trim motors and trim the stabilizer back manually using a hand crank in the cockpit.

Unfortunately, Boeing’s assumptions about pilots’ ability to respond in such a situation may not be realistic.  Smaller pilots may not have sufficient strength to pull back on the control yoke to recover from the dive caused by the MCAS.  And when the airspeed is high, aerodynamic forces on the horizontal stabilizer may make it too difficult for pilots to manually trim the horizontal stabilizer with the hand crank.  In particular, if they are simultaneously holding strong force on the control yokes they may not have a free hand to rotate the trim crank.

When the MCAS is acting to prevent a stall, the cockpit is full of audible and visual alarms that can be highly distracting.  And the time available to understand the situation, diagnose the fault, and take the necessary corrective actions can be very short before a fatal dive angle and descent rate occurs, particularly at low altitude.

Corner Cutting

At the time the 737 MAX program is being developed, Boeing management is obsessively focused on driving down costs in every area in order to maximize shareholder value.  Top management compensation is tied to increases in the company share price, providing strong incentives.

Boeing does not follow generally-accepted design practice when it incorporates the MCAS into a safety-critical flight control system for the 737 MAX.  Airbus aircraft have four angle of attack sensors, with comparison among sets of three in order to use the data from the two sensors that most closely agree. Although newer Boeing jetliner designs (e.g. the 777 and 787) use three, only two angle of attack sensors are provided for the 737 MAX.  The MCAS only reads data from one of the sensors on a given flight, and then switches to the sensor on the other side of the fuselage on the next flight. If the MCAS gets a reading of a high angle of attack from the one sensor it is using, it will command nose-down stabilizer trim.

However, it is well known that angle of attack sensor malfunctions are relatively common.  A number of things can cause problems, including icing, careless aircraft washing, damage from contact with a jetway, bird strikes, and maintenance errors.

In addition to using only one angle of attack sensor at a time, Boeing does not follow generally-accepted design practice by providing redundant electrical and signal buses with fail-safe design approaches.  This results in several different single-points-of-failure paths in the 737 MAX flight control system.

Boeing makes several cockpit safety features, such as an angle of attack display, extra-cost options with a high price.  As a result, many budget airlines do not order these options. Although a warning light indicating disagreement between the two angle of attack sensors is standard, it does not function if the angle of attack display isn’t installed. The non-functionality of this warning light is not documented.

Recently, it is reported that rather than using experienced in-house experts, Boeing outsourced much of the development and testing of 737 MAX software to temporary-hire software developers paid as low as $9 an hour by Indian contractors HCL Technologies and Cyient.

Boeing’s Lack of Transparency

Boeing obscures the existence of the MCAS flight control system as a fix to the aircraft flight characteristics problems.  It doesn’t have it reviewed by the FAA during the 737 MAX certification process, doesn’t communicate about it to the airline customer technical representatives, doesn’t document it in the flight manuals for the pilots, doesn’t incorporate it in any training materials, and doesn’t represent it in any 737 simulators for pilot training.  Until the first crash of a 737 MAX in late 2018, no one outside Boeing even knows of the existence of the MCAS or the design of the systems feeding data to the MCAS.

Certification of the 737 MAX

The FAA takes a hands-off approach on certifying the 737 MAX and trusts Boeing to effectively self-certify the new aircraft.  The type certificate from the original 737 design, nearly 50 years old, is used for the new variants. This policy is partly because the FAA certification department is drastically under-staffed due to many years of budget cutbacks.  Other nations accept the FAA certification of the 737 MAX and do not independently evaluate the aircraft’s design and airworthiness.

Accidents and the Grounding of All 737 MAXs

Two fatal crashes of 737 MAX aircraft occur in 5 months.  The crashes, traceable to flight control problems unable to be overcome by the pilots, expose the existence of the MCAS.  All 737 MAX aircraft worldwide are grounded until the aircraft can be determined to be safe. Airlines operating nearly 400 737 MAX aircraft scramble to replace the lost capacity with other aircraft.  They are forced to cancel many scheduled flights, and incur significant financial losses.

Investigations to determine the full details of the causes of the two crashes are underway, but will take a significant time to reach definitive conclusions. While the operation of the MCAS is clearly a factor, there are indications that a number of other aspects of the design may be involved in the overall failure chains.

Passenger confidence in the 737 MAX series evaporates.  People indicate they are unwilling to fly on a 737 MAX, at least until the aircraft is positively demonstrated to be safe.  Aircrews also express apprehension about the airplane.

Airlines begin cancelling their orders if they are able.  However, their contracts with Boeing make this very difficult.

Boeing continues to produce over 40 unmodified existing 737 MAX aircraft every month while no customers take delivery.  Boeing has difficulty finding places to store all the airplanes coming off the production line. Employee parking lots are filled with 737 MAXs.

Boeing management asserts in public testimony that the company has done nothing wrong.  The 737 MAX design is safe, Boeing’s design and certification processes for the airplane were sound, and that the pilots in the two crashes should have been able to overcome the problems even though they had no knowledge of the existence and operation of the MCAS.

Boeing tries to show that pilots should have been able to deal with the problems in the two crashes by reproducing the conditions in simulators.  However, the pilots in the simulator trials appear to have known what to expect, rather than being taken completely by surprise, so a successful recovery in a simulator may not be a realistic confirmation of the system safety.  There are doubts that the simulator trials are realistic in other respects as well.

Lawsuits against Boeing begin piling up, with many different plaintiffs filing suit.  Boeing’s stock price declines.

At the same time as the 737 MAX crisis, news comes out about serious manufacturing defects in other Boeing jetliners currently being produced.  These defects include tools, even ladders being left inside structural compartments after being closed up. The defects also include damage to electrical power and signal cabling that can cause shorts and defective data.  The U.S. Air Force refuses to accept additional Boeing KC-45 tanker aircraft (modified 767s) because of these production quality control defects. Boeing 787 Dreamliners are also reported to have serious manufacturing quality control problems.

A separate defect independent of the MCAS software is discovered in the 737 MAX flight control system. A microprocessor can get overwhelmed by the volume of data to be handled and cause significant delays in processing.

Although the investigation of the detailed causes of the crashes is far from being completed, Boeing is desperate to get the 737 MAX back into service as soon as possible.  Boeing engineers work on modifications to the MCAS software. However, no changes are made to the physical systems (sensors, signal and power buses, etc.). There is no guarantee that changes to the MCAS algorithms are sufficient to make the airplane safe.

Problems with Boeing’s Proposed Solution

Boeing proposes the fix for the 737 MAX is a software change to the MCAS so that it will only push down one time and not repeatedly.

This does not correct the multiple single-point-of-failure cases: depending on a single angle of attack sensor, a single data bus, and a single electrical circuit connecting the angle of attack information into the flight control computer.

This also does not correct the fact that MCAS does not take into account other data that show the aircraft is  not  in danger of stalling.  The flight data recorders from both crashes indicate that the other systems were showing that the nose attitude was down (not up), the trim was full nose down, the altitude, airspeed, power, and ground proximity warning all provided contrary indications to a stall situation and were opposite to what MCAS was designed to prevent.  A proper implementation of the MCAS would involve a complete integration with other flight data systems to provide backup, redundancy, and corroboration, so the MCAS cannot act alone or contrary to the majority of other indications.

Furthermore, MCAS bypasses pilot display of the situation and pilot control as primary, contrary to all good transport aircraft design practice.

There is a strong likelihood that damaged wiring may have caused the faulty inputs to the MCAS function.  On one of the aircraft that crashed, the angle of attack sensor produced faulty readings on flights the previous day.  Before the fatal flight, it was replaced with a brand new unit, indicating that the sensor itself was unlikely to be the source of the problems.  Boeing’s proposed fix does nothing to correct the possibility of damaged wiring from manufacturing quality control defects.

In one of the 737 MAX crashes, it appears that the powered stabilizer trim may have re-engaged itself after the pilots acted to disengage it.  This is not being addressed in Boeing’s proposed MCAS software fix.

The proposed fix does not have a means to disable the MCAS software functions altogether.  MCAS will continue to operate, regardless of pilot actions.

Boeing is not proposing to provide new training for 737 MAX pilots as part of the fix.  In particular, 737 flight simulators are not being upgraded to accurately represent the MCAS functionality and possible failures.

Importantly, Boeing is trying to avoid a full FAA (and other nation airworthiness agency) certification review of the modified aircraft, because this could delay returning the 737 MAX aircraft to service for a substantial period.

Pilot Views

Chesley "Sully" Sullenberger, the pilot for the “Miracle on the Hudson” water landing of an Airbus airliner in 2009, told the House Transportation Committee during a hearing on the 737 MAX that it is critical that pilots not be faced with "inadvertent traps."  He said "We must make sure that everyone who occupies a pilot seat is fully armed with the information, knowledge, training, skill and judgment to be able to be the absolute master of the aircraft and all its component systems and of the situations simultaneously and continuously throughout the flight."  Boeing’s attempt to avoid specific training for the 737 MAX and its specific characteristics is viewed very negatively by pilots.

Conclusions

Boeing has been driven by economic incentives into producing a product with deficiencies, seriously harming its reputation as a trusted supplier of safe aircraft.  By selling the 737 MAX as not requiring detailed certification review and needing no significant pilot training for the new characteristics of the aircraft, Boeing has failed in its responsibilities to be honest with regulatory authorities, airline customers, aircrews, and the flying public.  It is not clear at the present time (July 2019) when appropriate corrective actions can be completed to make the 737 MAX aircraft safe to return to regular airline service, even as large numbers of unmodified aircraft continue to roll off the production lines.

Appendix: Federal Aviation Regulation Airworthiness Criteria

• Sec. 25.173 — Static longitudinal stability.

Under the conditions specified in §25.175, the characteristics of the elevator control forces (including friction) must be as follows:

(a) A pull must be required to obtain and maintain speeds below the specified trim speed, and a push must be required to obtain and maintain speeds above the specified trim speed. This must be shown at any speed that can be obtained except speeds higher than the landing gear or wing flap operating limit speeds or  V FC /M FC, whichever is appropriate, or lower than the minimum speed for steady unstalled flight.

(b) The airspeed must return to within 10 percent of the original trim speed for the climb, approach, and landing conditions specified in §25.175 (a), (c), and (d), and must return to within 7.5 percent of the original trim speed for the cruising condition specified in §25.175(b), when the control force is slowly released from any speed within the range specified in paragraph (a) of this section.

(c) The average gradient of the stable slope of the stick force versus speed curve may not be less than 1 pound for each 6 knots.

(d) Within the free return speed range specified in paragraph (b) of this section, it is permissible for the airplane, without control forces, to stabilize on speeds above or below the desired trim speeds if exceptional attention on the part of the pilot is not required to return to and maintain the desired trim speed and altitude.

[Amendment 25–7, 30 FR 13117, Oct. 15, 1965]

• 25.601 General.

The  airplane  may not have design features or details that experience has shown to be hazardous or unreliable. The suitability of each questionable design detail and part must be established by tests.

Advertisement

The Boeing 737 MAX: Lessons for Engineering Ethics

• Original Research/Scholarship
• Published: 10 July 2020
• Volume 26 , pages 2957–2974, ( 2020 )

Cite this article

• Joseph Herkert 1 ,
• Jason Borenstein 2 &
• Keith Miller 3  

110k Accesses

58 Citations

108 Altmetric

11 Mentions

Explore all metrics

The crash of two 737 MAX passenger aircraft in late 2018 and early 2019, and subsequent grounding of the entire fleet of 737 MAX jets, turned a global spotlight on Boeing’s practices and culture. Explanations for the crashes include: design flaws within the MAX’s new flight control software system designed to prevent stalls; internal pressure to keep pace with Boeing’s chief competitor, Airbus; Boeing’s lack of transparency about the new software; and the lack of adequate monitoring of Boeing by the FAA, especially during the certification of the MAX and following the first crash. While these and other factors have been the subject of numerous government reports and investigative journalism articles, little to date has been written on the ethical significance of the accidents, in particular the ethical responsibilities of the engineers at Boeing and the FAA involved in designing and certifying the MAX. Lessons learned from this case include the need to strengthen the voice of engineers within large organizations. There is also the need for greater involvement of professional engineering societies in ethics-related activities and for broader focus on moral courage in engineering ethics education.

Similar content being viewed by others

Repentance as Rebuke: Betrayal and Moral Injury in Safety Engineering

Airworthiness and Safety in Air Operations in Ecuadorian Public Institutions

Safety in Numbers? (Lessons Learned From Aviation Safety Assessment Techniques)

Avoid common mistakes on your manuscript.

Introduction

In October 2018 and March 2019, Boeing 737 MAX passenger jets crashed minutes after takeoff; these two accidents claimed nearly 350 lives. After the second incident, all 737 MAX planes were grounded worldwide. The 737 MAX was an updated version of the 737 workhorse that first began flying in the 1960s. The crashes were precipitated by a failure of an Angle of Attack (AOA) sensor and the subsequent activation of new flight control software, the Maneuvering Characteristics Augmentation System (MCAS). The MCAS software was intended to compensate for changes in the size and placement of the engines on the MAX as compared to prior versions of the 737. The existence of the software, designed to prevent a stall due to the reconfiguration of the engines, was not disclosed to pilots until after the first crash. Even after that tragic incident, pilots were not required to undergo simulation training on the 737 MAX.

In this paper, we examine several aspects of the case, including technical and other factors that led up to the crashes, especially Boeing’s design choices and organizational tensions internal to the company, and between Boeing and the U.S. Federal Aviation Administration (FAA). While the case is ongoing and at this writing, the 737 MAX has yet to be recertified for flight, our analysis is based on numerous government reports and detailed news accounts currently available. We conclude with a discussion of specific lessons for engineers and engineering educators regarding engineering ethics.

Overview of 737 MAX History and Crashes

In December 2010, Boeing’s primary competitor Airbus announced the A320neo family of jetliners, an update of their successful A320 narrow-body aircraft. The A320neo featured larger, more fuel-efficient engines. Boeing had been planning to introduce a totally new aircraft to replace its successful, but dated, 737 line of jets; yet to remain competitive with Airbus, Boeing instead announced in August 2011 the 737 MAX family, an update of the 737NG with similar engine upgrades to the A320neo and other improvements (Gelles et al. 2019 ). The 737 MAX, which entered service in May 2017, became Boeing’s fastest-selling airliner of all time with 5000 orders from over 100 airlines worldwide (Boeing n.d. a) (See Fig.  1 for timeline of 737 MAX key events).

737 MAX timeline showing key events from 2010 to 2019

The 737 MAX had been in operation for over a year when on October 29, 2018, Lion Air flight JT610 crashed into the Java Sea 13 minutes after takeoff from Jakarta, Indonesia; all 189 passengers and crew on board died. Monitoring from the flight data recorder recovered from the wreckage indicated that MCAS, the software specifically designed for the MAX, forced the nose of the aircraft down 26 times in 10 minutes (Gates 2018 ). In October 2019, the Final Report of Indonesia’s Lion Air Accident Investigation was issued. The Report placed some of the blame on the pilots and maintenance crews but concluded that Boeing and the FAA were primarily responsible for the crash (Republic of Indonesia 2019 ).

MCAS was not identified in the original documentation/training for 737 MAX pilots (Glanz et al. 2019 ). But after the Lion Air crash, Boeing ( 2018 ) issued a Flight Crew Operations Manual Bulletin on November 6, 2018 containing procedures for responding to flight control problems due to possible erroneous AOA inputs. The next day the FAA ( 2018a ) issued an Emergency Airworthiness Directive on the same subject; however, the FAA did not ground the 737 MAX at that time. According to published reports, these notices were the first time that airline pilots learned of the existence of MCAS (e.g., Bushey 2019 ).

On March 20, 2019, about four months after the Lion Air crash, Ethiopian Airlines Flight ET302 crashed 6 minutes after takeoff in a field 39 miles from Addis Ababa Airport. The accident caused the deaths of all 157 passengers and crew. The Preliminary Report of the Ethiopian Airlines Accident Investigation (Federal Democratic Republic of Ethiopia 2019 ), issued in April 2019, indicated that the pilots followed the checklist from the Boeing Flight Crew Operations Manual Bulletin posted after the Lion Air crash but could not control the plane (Ahmed et al. 2019 ). This was followed by an Interim Report (Federal Democratic Republic of Ethiopia 2020 ) issued in March 2020 that exonerated the pilots and airline, and placed blame for the accident on design flaws in the MAX (Marks and Dahir 2020 ). Following the second crash, the 737 MAX was grounded worldwide with the U.S., through the FAA, being the last country to act on March 13, 2019 (Kaplan et al. 2019 ).

Design Choices that Led to the Crashes

As noted above, with its belief that it must keep up with its main competitor, Airbus, Boeing elected to modify the latest generation of the 737 family, the 737NG, rather than design an entirely new aircraft. Yet this raised a significant engineering challenge for Boeing. Mounting larger, more fuel-efficient engines, similar to those employed on the A320neo, on the existing 737 airframe posed a serious design problem, because the 737 family was built closer to the ground than the Airbus A320. In order to provide appropriate ground clearance, the larger engines had to be mounted higher and farther forward on the wings than previous models of the 737 (see Fig.  2 ). This significantly changed the aerodynamics of the aircraft and created the possibility of a nose-up stall under certain flight conditions (Travis 2019 ; Glanz et al. 2019 ).

(Image source: https://www.norebbo.com )

Boeing 737 MAX (left) compared to Boeing 737NG (right) showing larger 737 MAX engines mounted higher and more forward on the wing.

Boeing’s attempt to solve this problem involved incorporating MCAS as a software fix for the potential stall condition. The 737 was designed with two AOA sensors, one on each side of the aircraft. Yet Boeing decided that the 737 MAX would only use input from one of the plane’s two AOA sensors. If the single AOA sensor was triggered, MCAS would detect a dangerous nose-up condition and send a signal to the horizontal stabilizer located in the tail. Movement of the stabilizer would then force the plane’s tail up and the nose down (Travis 2019 ). In both the Lion Air and Ethiopian Air crashes, the AOA sensor malfunctioned, repeatedly activating MCAS (Gates 2018 ; Ahmed et al. 2019 ). Since the two crashes, Boeing has made adjustments to the MCAS, including that the system will rely on input from the two AOA sensors instead of just one. But still more problems with MCAS have been uncovered. For example, an indicator light that would alert pilots if the jet’s two AOA sensors disagreed, thought by Boeing to be standard on all MAX aircraft, would only operate as part of an optional equipment package that neither airline involved in the crashes purchased (Gelles and Kitroeff 2019a ).

Similar to its responses to previous accidents, Boeing has been reluctant to admit to a design flaw in its aircraft, instead blaming pilot error (Hall and Goelz 2019 ). In the 737 MAX case, the company pointed to the pilots’ alleged inability to control the planes under stall conditions (Economy 2019 ). Following the Ethiopian Airlines crash, Boeing acknowledged for the first time that MCAS played a primary role in the crashes, while continuing to highlight that other factors, such as pilot error, were also involved (Hall and Goelz 2019 ). For example, on April 29, 2019, more than a month after the second crash, then Boeing CEO Dennis Muilenburg defended MCAS by stating:

We've confirmed that [the MCAS system] was designed per our standards, certified per our standards, and we're confident in that process. So, it operated according to those design and certification standards. So, we haven't seen a technical slip or gap in terms of the fundamental design and certification of the approach. (Economy 2019 )

The view that MCAS was not primarily at fault was supported within an article written by noted journalist and pilot William Langewiesche ( 2019 ). While not denying Boeing made serious mistakes, he placed ultimate blame on the use of inexperienced pilots by the two airlines involved in the crashes. Langewiesche suggested that the accidents resulted from the cost-cutting practices of the airlines and the lax regulatory environments in which they operated. He argued that more experienced pilots, despite their lack of information on MCAS, should have been able to take corrective action to control the planes using customary stall prevention procedures. Langewiesche ( 2019 ) concludes in his article that:

What we had in the two downed airplanes was a textbook failure of airmanship. In broad daylight, these pilots couldn’t decipher a variant of a simple runaway trim, and they ended up flying too fast at low altitude, neglecting to throttle back and leading their passengers over an aerodynamic edge into oblivion. They were the deciding factor here — not the MCAS, not the Max.

Others have taken a more critical view of MCAS, Boeing, and the FAA. These critics prominently include Captain Chesley “Sully” Sullenberger, who famously crash-landed an A320 in the Hudson River after bird strikes had knocked out both of the plane’s engines. Sullenberger responded directly to Langewiesche in a letter to the Editor:

… Langewiesche draws the conclusion that the pilots are primarily to blame for the fatal crashes of Lion Air 610 and Ethiopian 302. In resurrecting this age-old aviation canard, Langewiesche minimizes the fatal design flaws and certification failures that precipitated those tragedies, and still pose a threat to the flying public. I have long stated, as he does note, that pilots must be capable of absolute mastery of the aircraft and the situation at all times, a concept pilots call airmanship. Inadequate pilot training and insufficient pilot experience are problems worldwide, but they do not excuse the fatally flawed design of the Maneuvering Characteristics Augmentation System (MCAS) that was a death trap.... (Sullenberger 2019 )

Noting that he is one of the few pilots to have encountered both accident sequences in a 737 MAX simulator, Sullenberger continued:

These emergencies did not present as a classic runaway stabilizer problem, but initially as ambiguous unreliable airspeed and altitude situations, masking MCAS. The MCAS design should never have been approved, not by Boeing, and not by the Federal Aviation Administration (FAA)…. (Sullenberger 2019 )

In June 2019, Sullenberger noted in Congressional Testimony that “These crashes are demonstrable evidence that our current system of aircraft design and certification has failed us. These accidents should never have happened” (Benning and DiFurio 2019 ).

Others have agreed with Sullenberger’s assessment. Software developer and pilot Gregory Travis ( 2019 ) argues that Boeing’s design for the 737 MAX violated industry norms and that the company unwisely used software to compensate for inadequacies in the hardware design. Travis also contends that the existence of MCAS was not disclosed to pilots in order to preserve the fiction that the 737 MAX was just an update of earlier 737 models, which served as a way to circumvent the more stringent FAA certification requirements for a new airplane. Reports from government agencies seem to support this assessment, emphasizing the chaotic cockpit conditions created by MCAS and poor certification practices. The U.S. National Transportation Safety Board (NTSB) ( 2019 ) Safety Recommendations to the FAA in September 2019 indicated that Boeing underestimated the effect MCAS malfunction would have on the cockpit environment (Kitroeff 2019 , a , b ). The FAA Joint Authorities Technical Review ( 2019 ), which included international participation, issued its Final Report in October 2019. The Report faulted Boeing and FAA in MCAS certification (Koenig 2019 ).

Despite Boeing’s attempts to downplay the role of MCAS, it began to work on a fix for the system shortly after the Lion Air crash (Gates 2019 ). MCAS operation will now be based on inputs from both AOA sensors, instead of just one sensor, with a cockpit indicator light when the sensors disagree. In addition, MCAS will only be activated once for an AOA warning rather than multiple times. What follows is that the system would only seek to prevent a stall once per AOA warning. Also, MCAS’s power will be limited in terms of how much it can move the stabilizer and manual override by the pilot will always be possible (Bellamy 2019 ; Boeing n.d. b; Gates 2019 ). For over a year after the Lion Air crash, Boeing held that pilot simulator training would not be required for the redesigned MCAS system. In January 2020, Boeing relented and recommended that pilot simulator training be required when the 737 MAX returns to service (Pasztor et al. 2020 ).

Boeing and the FAA

There is mounting evidence that Boeing, and the FAA as well, had warnings about the inadequacy of MCAS’s design, and about the lack of communication to pilots about its existence and functioning. In 2015, for example, an unnamed Boeing engineer raised in an email the issue of relying on a single AOA sensor (Bellamy 2019 ). In 2016, Mark Forkner, Boeing’s Chief Technical Pilot, in an email to a colleague flagged the erratic behavior of MCAS in a flight simulator noting: “It’s running rampant” (Gelles and Kitroeff 2019c ). Forkner subsequently came under federal investigation regarding whether he misled the FAA regarding MCAS (Kitroeff and Schmidt 2020 ).

In December 2018, following the Lion Air Crash, the FAA ( 2018b ) conducted a Risk Assessment that estimated that fifteen more 737 MAX crashes would occur in the expected fleet life of 45 years if the flight control issues were not addressed; this Risk Assessment was not publicly disclosed until Congressional hearings a year later in December 2019 (Arnold 2019 ). After the two crashes, a senior Boeing engineer, Curtis Ewbank, filed an internal ethics complaint in 2019 about management squelching of a system that might have uncovered errors in the AOA sensors. Ewbank has since publicly stated that “I was willing to stand up for safety and quality… Boeing management was more concerned with cost and schedule than safety or quality” (Kitroeff et al. 2019b ).

One factor in Boeing’s apparent reluctance to heed such warnings may be attributed to the seeming transformation of the company’s engineering and safety culture over time to a finance orientation beginning with Boeing’s merger with McDonnell–Douglas in 1997 (Tkacik 2019 ; Useem 2019 ). Critical changes after the merger included replacing many in Boeing’s top management, historically engineers, with business executives from McDonnell–Douglas and moving the corporate headquarters to Chicago, while leaving the engineering staff in Seattle (Useem 2019 ). According to Tkacik ( 2019 ), the new management even went so far as “maligning and marginalizing engineers as a class”.

Financial drivers thus began to place an inordinate amount of strain on Boeing employees, including engineers. During the development of the 737 MAX, significant production pressure to keep pace with the Airbus 320neo was ever-present. For example, Boeing management allegedly rejected any design changes that would prolong certification or require additional pilot training for the MAX (Gelles et al. 2019 ). As Adam Dickson, a former Boeing engineer, explained in a television documentary (BBC Panorama 2019 ): “There was a lot of interest and pressure on the certification and analysis engineers in particular, to look at any changes to the Max as minor changes”.

Production pressures were exacerbated by the “cozy relationship” between Boeing and the FAA (Kitroeff et al. 2019a ; see also Gelles and Kaplan 2019 ; Hall and Goelz 2019 ). Beginning in 2005, the FAA increased its reliance on manufacturers to certify their own planes. Self-certification became standard practice throughout the U.S. airline industry. By 2018, Boeing was certifying 96% of its own work (Kitroeff et al. 2019a ).

The serious drawbacks to self-certification became acutely apparent in this case. Of particular concern, the safety analysis for MCAS delegated to Boeing by the FAA was flawed in at least three respects: (1) the analysis underestimated the power of MCAS to move the plane’s horizontal tail and thus how difficult it would be for pilots to maintain control of the aircraft; (2) it did not account for the system deploying multiple times; and (3) it underestimated the risk level if MCAS failed, thus permitting a design feature—the single AOA sensor input to MCAS—that did not have built-in redundancy (Gates 2019 ). Related to these concerns, the ability of MCAS to move the horizontal tail was increased without properly updating the safety analysis or notifying the FAA about the change (Gates 2019 ). In addition, the FAA did not require pilot training for MCAS or simulator training for the 737 MAX (Gelles and Kaplan 2019 ). Since the MAX grounding, the FAA has been become more independent during its assessments and certifications—for example, they will not use Boeing personnel when certifying approvals of new 737 MAX planes (Josephs 2019 ).

The role of the FAA has also been subject to political scrutiny. The report of a study of the FAA certification process commissioned by Secretary of Transportation Elaine Chao (DOT 2020 ), released January 16, 2020, concluded that the FAA certification process was “appropriate and effective,” and that certification of the MAX as a new airplane would not have made a difference in the plane’s safety. At the same time, the report recommended a number of measures to strengthen the process and augment FAA’s staff (Pasztor and Cameron 2020 ). In contrast, a report of preliminary investigative findings by the Democratic staff of the House Committee on Transportation and Infrastructure (House TI 2020 ), issued in March 2020, characterized FAA’s certification of the MAX as “grossly insufficient” and criticized Boeing’s design flaws and lack of transparency with the FAA, airlines, and pilots (Duncan and Laris 2020 ).

Boeing has incurred significant economic losses from the crashes and subsequent grounding of the MAX. In December 2019, Boeing CEO Dennis Muilenburg was fired and the corporation announced that 737 MAX production would be suspended in January 2020 (Rich 2019 ) (see Fig.  1 ). Boeing is facing numerous lawsuits and possible criminal investigations. Boeing estimates that its economic losses for the 737 MAX will exceed $18 billion (Gelles 2020 ). In addition to the need to fix MCAS, other issues have arisen in recertification of the aircraft, including wiring for controls of the tail stabilizer, possible weaknesses in the engine rotors, and vulnerabilities in lightning protection for the engines (Kitroeff and Gelles 2020 ). The FAA had planned to flight test the 737 MAX early in 2020, and it was supposed to return to service in summer 2020 (Gelles and Kitroeff 2020 ). Given the global impact of the COVID-19 pandemic and other factors, it is difficult to predict when MAX flights might resume. In addition, uncertainty of passenger demand has resulted in some airlines delaying or cancelling orders for the MAX (Bogaisky 2020 ). Even after obtaining flight approval, public resistance to flying in the 737 MAX will probably be considerable (Gelles 2019 ).

Lessons for Engineering Ethics

The 737 MAX case is still unfolding and will continue to do so for some time. Yet important lessons can already be learned (or relearned) from the case. Some of those lessons are straightforward, and others are more subtle. A key and clear lesson is that engineers may need reminders about prioritizing the public good, and more specifically, the public’s safety. A more subtle lesson pertains to the ways in which the problem of many hands may or may not apply here. Other lessons involve the need for corporations, engineering societies, and engineering educators to rise to the challenge of nurturing and supporting ethical behavior on the part of engineers, especially in light of the difficulties revealed in this case.

All contemporary codes of ethics promulgated by major engineering societies state that an engineer’s paramount responsibility is to protect the “safety, health, and welfare” of the public. The American Institute of Aeronautics and Astronautics Code of Ethics indicates that engineers must “[H]old paramount the safety, health, and welfare of the public in the performance of their duties” (AIAA 2013 ). The Institute of Electrical and Electronics Engineers (IEEE) Code of Ethics goes further, pledging its members: “…to hold paramount the safety, health, and welfare of the public, to strive to comply with ethical design and sustainable development practices, and to disclose promptly factors that might endanger the public or the environment” (IEEE 2017 ). The IEEE Computer Society (CS) cooperated with the Association for Computing Machinery (ACM) in developing a Software Engineering Code of Ethics ( 1997 ) which holds that software engineers shall: “Approve software only if they have a well-founded belief that it is safe, meets specifications, passes appropriate tests, and does not diminish quality of life, diminish privacy or harm the environment….” According to Gotterbarn and Miller ( 2009 ), the latter code is a useful guide when examining cases involving software design and underscores the fact that during design, as in all engineering practice, the well-being of the public should be the overriding concern. While engineering codes of ethics are plentiful in number, they differ in their source of moral authority (i.e., organizational codes vs. professional codes), are often unenforceable through the law, and formally apply to different groups of engineers (e.g., based on discipline or organizational membership). However, the codes are generally recognized as a statement of the values inherent to engineering and its ethical commitments (Davis 2015 ).

An engineer’s ethical responsibility does not preclude consideration of factors such as cost and schedule (Pinkus et al. 1997 ). Engineers always have to grapple with constraints, including time and resource limitations. The engineers working at Boeing did have legitimate concerns about their company losing contracts to its competitor Airbus. But being an engineer means that public safety and welfare must be the highest priority (Davis 1991 ). The aforementioned software and other design errors in the development of the 737 MAX, which resulted in hundreds of deaths, would thus seem to be clear violations of engineering codes of ethics. In addition to pointing to engineering codes, Peterson ( 2019 ) argues that Boeing engineers and managers violated widely accepted ethical norms such as informed consent and the precautionary principle.

From an engineering perspective, the central ethical issue in the MAX case arguably circulates around the decision to use software (i.e., MCAS) to “mask” a questionable hardware design—the repositioning of the engines that disrupted the aerodynamics of the airframe (Travis 2019 ). As Johnston and Harris ( 2019 ) argue: “To meet the design goals and avoid an expensive hardware change, Boeing created the MCAS as a software Band-Aid.” Though a reliance on software fixes often happens in this manner, it places a high burden of safety on such fixes that they may not be able to handle, as is illustrated by the case of the Therac-25 radiation therapy machine. In the Therac-25 case, hardware safety interlocks employed in earlier models of the machine were replaced by software safety controls. In addition, information about how the software might malfunction was lacking from the user manual for the Therac machine. Thus, when certain types of errors appeared on its interface, the machine’s operators did not know how to respond. Software flaws, among other factors, contributed to six patients being given massive radiation overdoses, resulting in deaths and serious injuries (Leveson and Turner 1993 ). A more recent case involves problems with the embedded software guiding the electronic throttle in Toyota vehicles. In 2013, “…a jury found Toyota responsible for two unintended acceleration deaths, with expert witnesses citing bugs in the software and throttle fail safe defects” (Cummings and Britton 2020 ).

Boeing’s use of MCAS to mask the significant change in hardware configuration of the MAX was compounded by not providing redundancy for components prone to failure (i.e., the AOA sensors) (Campbell 2019 ), and by failing to notify pilots about the new software. In such cases, it is especially crucial that pilots receive clear documentation and relevant training so that they know how to manage the hand-off with an automated system properly (Johnston and Harris 2019 ). Part of the necessity for such training is related to trust calibration (Borenstein et al. 2020 ; Borenstein et al. 2018 ), a factor that has contributed to previous airplane accidents (e.g., Carr 2014 ). For example, if pilots do not place enough trust in an automated system, they may add risk by intervening in system operation. Conversely, if pilots trust an automated system too much, they may lack sufficient time to act once they identify a problem. This is further complicated in the MAX case because pilots were not fully aware, if at all, of MCAS’s existence and how the system functioned.

In addition to engineering decision-making that failed to prioritize public safety, questionable management decisions were also made at both Boeing and the FAA. As noted earlier, Boeing managerial leadership ignored numerous warning signs that the 737 MAX was not safe. Also, FAA’s shift to greater reliance on self-regulation by Boeing was ill-advised; that lesson appears to have been learned at the expense of hundreds of lives (Duncan and Aratani 2019 ).

The Problem of Many Hands Revisited

Actions, or inaction, by large, complex organizations, in this case corporate and government entities, suggest that the “problem of many hands” may be relevant to the 737 MAX case. At a high level of abstraction, the problem of many hands involves the idea that accountability is difficult to assign in the face of collective action, especially in a computerized society (Thompson 1980 ; Nissenbaum 1994 ). According to Nissenbaum ( 1996 , 29), “Where a mishap is the work of ‘many hands,’ it may not be obvious who is to blame because frequently its most salient and immediate causal antecedents do not converge with its locus of decision-making. The conditions for blame, therefore, are not satisfied in a way normally satisfied when a single individual is held blameworthy for a harm”.

However, there is an alternative understanding of the problem of many hands. In this version of the problem, the lack of accountability is not merely because multiple people and multiple decisions figure into a final outcome. Instead, in order to “qualify” as the problem of many hands, the component decisions should be benign, or at least far less harmful, if examined in isolation; only when the individual decisions are collectively combined do we see the most harmful result. In this understanding, the individual decision-makers should not have the same moral culpability as they would if they made all the decisions by themselves (Noorman 2020 ).

Both of these understandings of the problem of many hands could shed light on the 737 MAX case. Yet we focus on the first version of the problem. We admit the possibility that some of the isolated decisions about the 737 MAX may have been made in part because of ignorance of a broader picture. While we do not stake a claim on whether this is what actually happened in the MAX case, we acknowledge that it may be true in some circumstances. However, we think the more important point is that some of the 737 MAX decisions were so clearly misguided that a competent engineer should have seen the implications, even if the engineer was not aware of all of the broader context. The problem then is to identify responsibility for the questionable decisions in a way that discourages bad judgments in the future, a task made more challenging by the complexities of the decision-making. Legal proceedings about this case are likely to explore those complexities in detail and are outside the scope of this article. But such complexities must be examined carefully so as not to act as an insulator to accountability.

When many individuals are involved in the design of a computing device, for example, and a serious failure occurs, each person might try to absolve themselves of responsibility by indicating that “too many people” and “too many decisions” were involved for any individual person to know that the problem was going to happen. This is a common, and often dubious, excuse in the attempt to abdicate responsibility for a harm. While it can have different levels of magnitude and severity, the problem of many hands often arises in large scale ethical failures in engineering such as in the Deepwater Horizon oil spill (Thompson 2014 ).

Possible examples in the 737 MAX case of the difficulty of assigning moral responsibility due to the problem of many hands include:

The decision to reposition the engines;

The decision to mask the jet’s subsequent dynamic instability with MCAS;

The decision to rely on only one AOA sensor in designing MCAS; and

The decision to not inform nor properly train pilots about the MCAS system.

While overall responsibility for each of these decisions may be difficult to allocate precisely, at least points 1–3 above arguably reflect fundamental errors in engineering judgement (Travis 2019 ). Boeing engineers and FAA engineers either participated in or were aware of these decisions (Kitroeff and Gelles 2019 ) and may have had opportunities to reconsider or redirect such decisions. As Davis has noted ( 2012 ), responsible engineering professionals make it their business to address problems even when they did not cause the problem, or, we would argue, solely cause it. As noted earlier, reports indicate that at least one Boeing engineer expressed reservations about the design of MCAS (Bellamy 2019 ). Since the two crashes, one Boeing engineer, Curtis Ewbank, filed an internal ethics complaint (Kitroeff et al. 2019b ) and several current and former Boeing engineers and other employees have gone public with various concerns about the 737 MAX (Pasztor 2019 ). And yet, as is often the case, the flawed design went forward with tragic results.

Enabling Ethical Engineers

The MAX case is eerily reminiscent of other well-known engineering ethics case studies such as the Ford Pinto (Birsch and Fielder 1994 ), Space Shuttle Challenger (Werhane 1991 ), and GM ignition switch (Jennings and Trautman 2016 ). In the Pinto case, Ford engineers were aware of the unsafe placement of the fuel tank well before the car was released to the public and signed off on the design even though crash tests showed the tank was vulnerable to rupture during low-speed rear-end collisions (Baura 2006 ). In the case of the GM ignition switch, engineers knew for at least four years about the faulty design, a flaw that resulted in at least a dozen fatal accidents (Stephan 2016 ). In the case of the well-documented Challenger accident, engineer Roger Boisjoly warned his supervisors at Morton Thiokol of potentially catastrophic flaws in the shuttle’s solid rocket boosters a full six months before the accident. He, along with other engineers, unsuccessfully argued on the eve of launch for a delay due to the effect that freezing temperatures could have on the boosters’ O-ring seals. Boisjoly was also one of a handful of engineers to describe these warnings to the Presidential commission investigating the accident (Boisjoly et al. 1989 ).

Returning to the 737 MAX case, could Ewbank or others with concerns about the safety of the airplane have done more than filing ethics complaints or offering public testimony only after the Lion Air and Ethiopian Airlines crashes? One might argue that requiring professional registration by all engineers in the U.S. would result in more ethical conduct (for example, by giving state licensing boards greater oversight authority). Yet the well-entrenched “industry exemption” from registration for most engineers working in large corporations has undermined such calls (Kline 2001 ).

It could empower engineers with safety concerns if Boeing and other corporations would strengthen internal ethics processes, including sincere and meaningful responsiveness to anonymous complaint channels. Schwartz ( 2013 ) outlines three core components of an ethical corporate culture, including strong core ethical values, a formal ethics program (including an ethics hotline), and capable ethical leadership. Schwartz points to Siemens’ creation of an ethics and compliance department following a bribery scandal as an example of a good solution. Boeing has had a compliance department for quite some time (Schnebel and Bienert 2004 ) and has taken efforts in the past to evaluate its effectiveness (Boeing 2003 ). Yet it is clear that more robust measures are needed in response to ethics concerns and complaints. Since the MAX crashes, Boeing’s Board has implemented a number of changes including establishing a corporate safety group and revising internal reporting procedures so that lead engineers primarily report to the chief engineer rather than business managers (Gelles and Kitroeff 2019b , Boeing n.d. c). Whether these measures will be enough to restore Boeing’s former engineering-centered focus remains to be seen.

Professional engineering societies could play a stronger role in communicating and enforcing codes of ethics, in supporting ethical behavior of engineers, and by providing more educational opportunities for learning about ethics and about the ethical responsibilities of engineers. Some societies, including ACM and IEEE, have become increasingly engaged in ethics-related activities. Initially ethics engagement by the societies consisted primarily of a focus on macroethical issues such as sustainable development (Herkert 2004 ). Recently, however, the societies have also turned to a greater focus on microethical issues (the behavior of individuals). The 2017 revision to the IEEE Code of Ethics, for example, highlights the importance of “ethical design” (Adamson and Herkert 2020 ). This parallels IEEE activities in the area of design of autonomous and intelligent systems (e.g., IEEE 2018 ). A promising outcome of this emphasis is a move toward implementing “ethical design” frameworks (Peters et al. 2020 ).

In terms of engineering education, educators need to place a greater emphasis on fostering moral courage, that is the courage to act on one’s moral convictions including adherence to codes of ethics. This is of particular significance in large organizations such as Boeing and the FAA where the agency of engineers may be limited by factors such as organizational culture (Watts and Buckley 2017 ). In a study of twenty-six ethics interventions in engineering programs, Hess and Fore ( 2018 ) found that only twenty-seven percent had a learning goal of development of “ethical courage, confidence or commitment”. This goal could be operationalized in a number of ways, for example through a focus on virtue ethics (Harris 2008 ) or professional identity (Hashemian and Loui 2010 ). This need should not only be addressed within the engineering curriculum but during lifelong learning initiatives and other professional development opportunities as well (Miller 2019 ).

The circumstances surrounding the 737 MAX airplane could certainly serve as an informative case study for ethics or technical courses. The case can shed light on important lessons for engineers including the complex interactions, and sometimes tensions, between engineering and managerial considerations. The case also tangibly displays that what seems to be relatively small-scale, and likely well-intended, decisions by individual engineers can combine collectively to result in large-scale tragedy. No individual person wanted to do harm, but it happened nonetheless. Thus, the case can serve a reminder to current and future generations of engineers that public safety must be the first and foremost priority. A particularly useful pedagogical method for considering this case is to assign students to the roles of engineers, managers, and regulators, as well as the flying public, airline personnel, and representatives of engineering societies (Herkert 1997 ). In addition to illuminating the perspectives and responsibilities of each stakeholder group, role-playing can also shed light on the “macroethical” issues raised by the case (Martin et al. 2019 ) such as airline safety standards and the proper role for engineers and engineering societies in the regulation of the industry.

Conclusions and Recommendations

The case of the Boeing 737 MAX provides valuable lessons for engineers and engineering educators concerning the ethical responsibilities of the profession. Safety is not cheap, but careless engineering design in the name of minimizing costs and adhering to a delivery schedule is a symptom of ethical blight. Using almost any standard ethical analysis or framework, Boeing’s actions regarding the safety of the 737 MAX, particularly decisions regarding MCAS, fall short.

Boeing failed in its obligations to protect the public. At a minimum, the company had an obligation to inform airlines and pilots of significant design changes, especially the role of MCAS in compensating for repositioning of engines in the MAX from prior versions of the 737. Clearly, it was a “significant” change because it had a direct, and unfortunately tragic, impact on the public’s safety. The Boeing and FAA interaction underscores the fact that conflicts of interest are a serious concern in regulatory actions within the airline industry.

Internal and external organizational factors may have interfered with Boeing and FAA engineers’ fulfillment of their professional ethical responsibilities; this is an all too common problem that merits serious attention from industry leaders, regulators, professional societies, and educators. The lessons to be learned in this case are not new. After large scale tragedies involving engineering decision-making, calls for change often emerge. But such lessons apparently must be retaught and relearned by each generation of engineers.

ACM/IEEE-CS Joint Task Force. (1997). Software Engineering Code of Ethics and Professional Practice, https://ethics.acm.org/code-of-ethics/software-engineering-code/ .

Adamson, G., & Herkert, J. (2020). Addressing intelligent systems and ethical design in the IEEE Code of Ethics. In Codes of ethics and ethical guidelines: Emerging technologies, changing fields . New York: Springer ( in press ).

Ahmed, H., Glanz, J., & Beech, H. (2019). Ethiopian airlines pilots followed Boeing’s safety procedures before crash, Report Shows. The New York Times, April 4, https://www.nytimes.com/2019/04/04/world/asia/ethiopia-crash-boeing.html .

AIAA. (2013). Code of Ethics, https://www.aiaa.org/about/Governance/Code-of-Ethics .

Arnold, K. (2019). FAA report predicted there could be 15 more 737 MAX crashes. The Dallas Morning News, December 11, https://www.dallasnews.com/business/airlines/2019/12/11/faa-chief-says-boeings-737-max-wont-be-approved-in-2019/

Baura, G. (2006). Engineering ethics: an industrial perspective . Amsterdam: Elsevier.

Google Scholar  

BBC News. (2019). Work on production line of Boeing 737 MAX ‘Not Adequately Funded’. July 29, https://www.bbc.com/news/business-49142761 .

Bellamy, W. (2019). Boeing CEO outlines 737 MAX MCAS software fix in congressional hearings. Aviation Today, November 2, https://www.aviationtoday.com/2019/11/02/boeing-ceo-outlines-mcas-updates-congressional-hearings/ .

Benning, T., & DiFurio, D. (2019). American Airlines Pilots Union boss prods lawmakers to solve 'Crisis of Trust' over Boeing 737 MAX. The Dallas Morning News, June 19, https://www.dallasnews.com/business/airlines/2019/06/19/american-airlines-pilots-union-boss-prods-lawmakers-to-solve-crisis-of-trust-over-boeing-737-max/ .

Birsch, D., & Fielder, J. (Eds.). (1994). The ford pinto case: A study in applied ethics, business, and technology . New York: The State University of New York Press.

Boeing. (2003). Boeing Releases Independent Reviews of Company Ethics Program. December 18, https://boeing.mediaroom.com/2003-12-18-Boeing-Releases-Independent-Reviews-of-Company-Ethics-Program .

Boeing. (2018). Flight crew operations manual bulletin for the Boeing company. November 6, https://www.avioesemusicas.com/wp-content/uploads/2018/10/TBC-19-Uncommanded-Nose-Down-Stab-Trim-Due-to-AOA.pdf .

Boeing. (n.d. a). About the Boeing 737 MAX. https://www.boeing.com/commercial/737max/ .

Boeing. (n.d. b). 737 MAX Updates. https://www.boeing.com/737-max-updates/ .

Boeing. (n.d. c). Initial actions: sharpening our focus on safety. https://www.boeing.com/737-max-updates/resources/ .

Bogaisky, J. (2020). Boeing stock plunges as coronavirus imperils quick ramp up in 737 MAX deliveries. Forbes, March 11, https://www.forbes.com/sites/jeremybogaisky/2020/03/11/boeing-coronavirus-737-max/#1b9eb8955b5a .

Boisjoly, R. P., Curtis, E. F., & Mellican, E. (1989). Roger Boisjoly and the challenger disaster: The ethical dimensions. J Bus Ethics, 8 (4), 217–230.

Article   Google Scholar  

Borenstein, J., Mahajan, H. P., Wagner, A. R., & Howard, A. (2020). Trust and pediatric exoskeletons: A comparative study of clinician and parental perspectives. IEEE Transactions on Technology and Society , 1 (2), 83–88.

Borenstein, J., Wagner, A. R., & Howard, A. (2018). Overtrust of pediatric health-care robots: A preliminary survey of parent perspectives. IEEE Robot Autom Mag, 25 (1), 46–54.

Bushey, C. (2019). The Tough Crowd Boeing Needs to Convince. Crain’s Chicago Business, October 25, https://www.chicagobusiness.com/manufacturing/tough-crowd-boeing-needs-convince .

Campbell, D. (2019). The many human errors that brought down the Boeing 737 MAX. The Verge, May 2, https://www.theverge.com/2019/5/2/18518176/boeing-737-max-crash-problems-human-error-mcas-faa .

Carr, N. (2014). The glass cage: Automation and us . Norton.

Cummings, M. L., & Britton, D. (2020). Regulating safety-critical autonomous systems: past, present, and future perspectives. In Living with robots (pp. 119–140). Academic Press, New York.

Davis, M. (1991). Thinking like an engineer: The place of a code of ethics in the practice of a profession. Philos Publ Affairs, 20 (2), 150–167.

Davis, M. (2012). “Ain’t no one here but us social forces”: Constructing the professional responsibility of engineers. Sci Eng Ethics, 18 (1), 13–34.

Davis, M. (2015). Engineering as profession: Some methodological problems in its study. In Engineering identities, epistemologies and values (pp. 65–79). Springer, New York.

Department of Transportation (DOT). (2020). Official report of the special committee to review the Federal Aviation Administration’s Aircraft Certification Process, January 16. https://www.transportation.gov/sites/dot.gov/files/2020-01/scc-final-report.pdf .

Duncan, I., & Aratani, L. (2019). FAA flexes its authority in final stages of Boeing 737 MAX safety review. The Washington Post, November 27, https://www.washingtonpost.com/transportation/2019/11/27/faa-flexes-its-authority-final-stages-boeing-max-safety-review/ .

Duncan, I., & Laris, M. (2020). House report on 737 Max crashes faults Boeing’s ‘culture of concealment’ and labels FAA ‘grossly insufficient’. The Washington Post, March 6, https://www.washingtonpost.com/local/trafficandcommuting/house-report-on-737-max-crashes-faults-boeings-culture-of-concealment-and-labels-faa-grossly-insufficient/2020/03/06/9e336b9e-5fce-11ea-b014-4fafa866bb81_story.html .

Economy, P. (2019). Boeing CEO Puts Partial Blame on Pilots of Crashed 737 MAX Aircraft for Not 'Completely' Following Procedures. Inc., April 30, https://www.inc.com/peter-economy/boeing-ceo-puts-partial-blame-on-pilots-of-crashed-737-max-aircraft-for-not-completely-following-procedures.html .

Federal Aviation Administration (FAA). (2018a). Airworthiness directives; the Boeing company airplanes. FR Doc No: R1-2018-26365. https://rgl.faa.gov/Regulatory_and_Guidance_Library/rgad.nsf/0/fe8237743be9b8968625835b004fc051/$FILE/2018-23-51_Correction.pdf .

Federal Aviation Administration (FAA). (2018b). Quantitative Risk Assessment. https://www.documentcloud.org/documents/6573544-Risk-Assessment-for-Release-1.html#document/p1 .

Federal Aviation Administration (FAA). (2019). Joint authorities technical review: observations, findings, and recommendations. October 11, https://www.faa.gov/news/media/attachments/Final_JATR_Submittal_to_FAA_Oct_2019.pdf .

Federal Democratic Republic of Ethiopia. (2019). Aircraft accident investigation preliminary report. Report No. AI-01/19, April 4, https://leehamnews.com/wp-content/uploads/2019/04/Preliminary-Report-B737-800MAX-ET-AVJ.pdf .

Federal Democratic Republic of Ethiopia. (2020). Aircraft Accident Investigation Interim Report. Report No. AI-01/19, March 20, https://www.aib.gov.et/wp-content/uploads/2020/documents/accident/ET-302%2520%2520Interim%2520Investigation%2520%2520Report%2520March%25209%25202020.pdf .

Gates, D. (2018). Pilots struggled against Boeing's 737 MAX control system on doomed Lion Air flight. The Seattle Times, November 27, https://www.seattletimes.com/business/boeing-aerospace/black-box-data-reveals-lion-air-pilots-struggle-against-boeings-737-max-flight-control-system/ .

Gates, D. (2019). Flawed analysis, failed oversight: how Boeing, FAA Certified the Suspect 737 MAX Flight Control System. The Seattle Times, March 17, https://www.seattletimes.com/business/boeing-aerospace/failed-certification-faa-missed-safety-issues-in-the-737-max-system-implicated-in-the-lion-air-crash/ .

Gelles, D. (2019). Boeing can’t fly its 737 MAX, but it’s ready to sell its safety. The New York Times, December 24 (updated February 10, 2020), https://www.nytimes.com/2019/12/24/business/boeing-737-max-survey.html .

Gelles, D. (2020). Boeing expects 737 MAX costs will surpass $18 Billion. The New York Times, January 29, https://www.nytimes.com/2020/01/29/business/boeing-737-max-costs.html .

Gelles, D., & Kaplan, T. (2019). F.A.A. Approval of Boeing jet involved in two crashes comes under scrutiny. The New York Times, March 19, https://www.nytimes.com/2019/03/19/business/boeing-elaine-chao.html .

Gelles, D., & Kitroeff, N. (2019a). Boeing Believed a 737 MAX warning light was standard. It wasn’t. New York: The New York Times. https://www.nytimes.com/2019/05/05/business/boeing-737-max-warning-light.html .

Gelles, D., & Kitroeff, N. (2019b). Boeing board to call for safety changes after 737 MAX Crashes. The New York Times, September 15, (updated October 2), https://www.nytimes.com/2019/09/15/business/boeing-safety-737-max.html .

Gelles, D., & Kitroeff, N. (2019c). Boeing pilot complained of ‘Egregious’ issue with 737 MAX in 2016. The New York Times, October 18, https://www.nytimes.com/2019/10/18/business/boeing-flight-simulator-text-message.html .

Gelles, D., & Kitroeff, N. (2020). What needs to happen to get Boeing’s 737 MAX flying again?. The New York Times, February 10, https://www.nytimes.com/2020/02/10/business/boeing-737-max-fly-again.html .

Gelles, D., Kitroeff, N., Nicas, J., & Ruiz, R. R. (2019). Boeing was ‘Go, Go, Go’ to beat airbus with the 737 MAX. The New York Times, March 23, https://www.nytimes.com/2019/03/23/business/boeing-737-max-crash.html .

Glanz, J., Creswell, J., Kaplan, T., & Wichter, Z. (2019). After a Lion Air 737 MAX Crashed in October, Questions About the Plane Arose. The New York Times, February 3, https://www.nytimes.com/2019/02/03/world/asia/lion-air-plane-crash-pilots.html .

Gotterbarn, D., & Miller, K. W. (2009). The public is the priority: Making decisions using the software engineering code of ethics. Computer, 42 (6), 66–73.

Hall, J., & Goelz, P. (2019). The Boeing 737 MAX Crisis Is a Leadership Failure, The New York Times, July 17, https://www.nytimes.com/2019/07/17/opinion/boeing-737-max.html .

Harris, C. E. (2008). The good engineer: Giving virtue its due in engineering ethics. Science and Engineering Ethics, 14 (2), 153–164.

Hashemian, G., & Loui, M. C. (2010). Can instruction in engineering ethics change students’ feelings about professional responsibility? Science and Engineering Ethics, 16 (1), 201–215.

Herkert, J. R. (1997). Collaborative learning in engineering ethics. Science and Engineering Ethics, 3 (4), 447–462.

Herkert, J. R. (2004). Microethics, macroethics, and professional engineering societies. In Emerging technologies and ethical issues in engineering: papers from a workshop (pp. 107–114). National Academies Press, New York.

Hess, J. L., & Fore, G. (2018). A systematic literature review of US engineering ethics interventions. Science and Engineering Ethics, 24 (2), 551–583.

House Committee on Transportation and Infrastructure (House TI). (2020). The Boeing 737 MAX Aircraft: Costs, Consequences, and Lessons from its Design, Development, and Certification-Preliminary Investigative Findings, March. https://transportation.house.gov/imo/media/doc/TI%2520Preliminary%2520Investigative%2520Findings%2520Boeing%2520737%2520MAX%2520March%25202020.pdf .

IEEE. (2017). IEEE Code of Ethics. https://www.ieee.org/about/corporate/governance/p7-8.html .

IEEE. (2018). Ethically Aligned Design: A Vision for Prioritizing Human Well-being with Autonomous and Intelligent Systems (version 2). https://standards.ieee.org/content/dam/ieee-standards/standards/web/documents/other/ead_v2.pdf .

Jennings, M., & Trautman, L. J. (2016). Ethical culture and legal liability: The GM switch crisis and lessons in governance. Boston University Journal of Science and Technology Law, 22 , 187.

Johnston, P., & Harris, R. (2019). The Boeing 737 MAX Saga: Lessons for software organizations. Software Quality Professional, 21 (3), 4–12.

Josephs, L. (2019). FAA tightens grip on Boeing with plan to individually review each new 737 MAX Jetliner. CNBC, November 27, https://www.cnbc.com/2019/11/27/faa-tightens-grip-on-boeing-with-plan-to-individually-inspect-max-jets.html .

Kaplan, T., Austen, I., & Gebrekidan, S. (2019). The New York Times, March 13. https://www.nytimes.com/2019/03/13/business/canada-737-max.html .

Kitroeff, N. (2019). Boeing underestimated cockpit chaos on 737 MAX, N.T.S.B. Says. The New York Times, September 26, https://www.nytimes.com/2019/09/26/business/boeing-737-max-ntsb-mcas.html .

Kitroeff, N., & Gelles, D. (2019). Legislators call on F.A.A. to say why it overruled its experts on 737 MAX. The New York Times, November 7 (updated December 11), https://www.nytimes.com/2019/11/07/business/boeing-737-max-faa.html .

Kitroeff, N., & Gelles, D. (2020). It’s not just software: New safety risks under scrutiny on Boeing’s 737 MAX. The New York Times, January 5, https://www.nytimes.com/2020/01/05/business/boeing-737-max.html .

Kitroeff, N., & Schmidt, M. S. (2020). Federal prosecutors investigating whether Boeing pilot lied to F.A.A. The New York Times, February 21, https://www.nytimes.com/2020/02/21/business/boeing-737-max-investigation.html .

Kitroeff, N., Gelles, D., & Nicas, J. (2019a). The roots of Boeing’s 737 MAX Crisis: A regulator relaxes its oversight. The New York Times, July 27, https://www.nytimes.com/2019/07/27/business/boeing-737-max-faa.html .

Kitroeff, N., Gelles, D., & Nicas, J. (2019b). Boeing 737 MAX safety system was vetoed, Engineer Says. The New York Times, October 2, https://www.nytimes.com/2019/10/02/business/boeing-737-max-crashes.html .

Kline, R. R. (2001). Using history and sociology to teach engineering ethics. IEEE Technology and Society Magazine, 20 (4), 13–20.

Koenig, D. (2019). Boeing, FAA both faulted in certification of the 737 MAX. AP, October 11, https://apnews.com/470abf326cdb4229bdc18c8ad8caa78a .

Langewiesche, W. (2019). What really brought down the Boeing 737 MAX? The New York Times, September 18, https://www.nytimes.com/2019/09/18/magazine/boeing-737-max-crashes.html .

Leveson, N. G., & Turner, C. S. (1993). An investigation of the Therac-25 accidents. Computer, 26 (7), 18–41.

Marks, S., & Dahir, A. L. (2020). Ethiopian report on 737 Max Crash Blames Boeing, March 9, https://www.nytimes.com/2020/03/09/world/africa/ethiopia-crash-boeing.html .

Martin, D. A., Conlon, E., & Bowe, B. (2019). The role of role-play in student awareness of the social dimension of the engineering profession. European Journal of Engineering Education, 44 (6), 882–905.

Miller, G. (2019). Toward lifelong excellence: navigating the engineering-business space. In The Engineering-Business Nexus (pp. 81–101). Springer, Cham.

National Transportation Safety Board (NTSB). (2019). Safety Recommendations Report, September 19, https://www.ntsb.gov/investigations/AccidentReports/Reports/ASR1901.pdf .

Nissenbaum, H. (1994). Computing and accountability. Communications of the ACM , January, https://dl.acm.org/doi/10.1145/175222.175228 .

Nissenbaum, H. (1996). Accountability in a computerized society. Science and Engineering Ethics, 2 (1), 25–42.

Noorman, M. (2020). Computing and moral responsibility. In Zalta, E. N. (Ed.). The Stanford Encyclopedia of Philosophy (Spring), https://plato.stanford.edu/archives/spr2020/entries/computing-responsibility .

Pasztor, A. (2019). More Whistleblower complaints emerge in Boeing 737 MAX Safety Inquiries. The Wall Street Journal, April 27, https://www.wsj.com/articles/more-whistleblower-complaints-emerge-in-boeing-737-max-safety-inquiries-11556418721 .

Pasztor, A., & Cameron, D. (2020). U.S. News: Panel Backs How FAA gave safety approval for 737 MAX. The Wall Street Journal, January 17, https://www.wsj.com/articles/panel-clears-737-maxs-safety-approval-process-at-faa-11579188086 .

Pasztor, A., Cameron.D., & Sider, A. (2020). Boeing backs MAX simulator training in reversal of stance. The Wall Street Journal, January 7, https://www.wsj.com/articles/boeing-recommends-fresh-max-simulator-training-11578423221 .

Peters, D., Vold, K., Robinson, D., & Calvo, R. A. (2020). Responsible AI—two frameworks for ethical design practice. IEEE Transactions on Technology and Society, 1 (1), 34–47.

Peterson, M. (2019). The ethical failures behind the Boeing disasters. Blog of the APA, April 8, https://blog.apaonline.org/2019/04/08/the-ethical-failures-behind-the-boeing-disasters/ .

Pinkus, R. L., Pinkus, R. L. B., Shuman, L. J., Hummon, N. P., & Wolfe, H. (1997). Engineering ethics: Balancing cost, schedule, and risk-lessons learned from the space shuttle . Cambridge: Cambridge University Press.

Republic of Indonesia. (2019). Final Aircraft Accident Investigation Report. KNKT.18.10.35.04, https://knkt.dephub.go.id/knkt/ntsc_aviation/baru/2018%2520-%2520035%2520-%2520PK-LQP%2520Final%2520Report.pdf .

Rich, G. (2019). Boeing 737 MAX should return in 2020 but the crisis won't be over. Investor's Business Daily, December 31, https://www.investors.com/news/boeing-737-max-service-return-2020-crisis-not-over/ .

Schnebel, E., & Bienert, M. A. (2004). Implementing ethics in business organizations. Journal of Business Ethics, 53 (1–2), 203–211.

Schwartz, M. S. (2013). Developing and sustaining an ethical corporate culture: The core elements. Business Horizons, 56 (1), 39–50.

Stephan, K. (2016). GM Ignition Switch Recall: Too Little Too Late? [Ethical Dilemmas]. IEEE Technology and Society Magazine, 35 (2), 34–35.

Sullenberger, S. (2019). My letter to the editor of New York Times Magazine, https://www.sullysullenberger.com/my-letter-to-the-editor-of-new-york-times-magazine/ .

Thompson, D. F. (1980). Moral responsibility of public officials: The problem of many hands. American Political Science Review, 74 (4), 905–916.

Thompson, D. F. (2014). Responsibility for failures of government: The problem of many hands. The American Review of Public Administration, 44 (3), 259–273.

Tkacik, M. (2019). Crash course: how Boeing’s managerial revolution created the 737 MAX Disaster. The New Republic, September 18, https://newrepublic.com/article/154944/boeing-737-max-investigation-indonesia-lion-air-ethiopian-airlines-managerial-revolution .

Travis, G. (2019). How the Boeing 737 MAX disaster looks to a software developer. IEEE Spectrum , April 18, https://spectrum.ieee.org/aerospace/aviation/how-the-boeing-737-max-disaster-looks-to-a-software-developer .

Useem, J. (2019). The long-forgotten flight that sent Boeing off course. The Atlantic, November 20, https://www.theatlantic.com/ideas/archive/2019/11/how-boeing-lost-its-bearings/602188/ .

Watts, L. L., & Buckley, M. R. (2017). A dual-processing model of moral whistleblowing in organizations. Journal of Business Ethics, 146 (3), 669–683.

Werhane, P. H. (1991). Engineers and management: The challenge of the Challenger incident. Journal of Business Ethics, 10 (8), 605–616.

Download references

Acknowledgement

The authors would like to thank the anonymous reviewers for their helpful comments.

Author information

Authors and affiliations.

North Carolina State University, Raleigh, NC, USA

Joseph Herkert

Georgia Institute of Technology, Atlanta, GA, USA

Jason Borenstein

University of Missouri – St. Louis, St. Louis, MO, USA

Keith Miller

You can also search for this author in PubMed   Google Scholar

Corresponding author

Correspondence to Joseph Herkert .

Additional information

Publisher's note.

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Herkert, J., Borenstein, J. & Miller, K. The Boeing 737 MAX: Lessons for Engineering Ethics. Sci Eng Ethics 26 , 2957–2974 (2020). https://doi.org/10.1007/s11948-020-00252-y

Download citation

Received : 26 March 2020

Accepted : 25 June 2020

Published : 10 July 2020

Issue Date : December 2020

DOI : https://doi.org/10.1007/s11948-020-00252-y

Share this article

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

• Engineering ethics
• Airline safety
• Engineering design
• Corporate culture
• Software engineering
• Find a journal
• Publish with us
• Track your research

• Predictive Analytics Workshops
• Corporate Strategy Workshops
• Advanced Excel for MBA
• Powerpoint Workshops
• Digital Transformation
• Competing on Business Analytics
• Aligning Analytics with Strategy
• Building & Sustaining Competitive Advantages
• Corporate Strategy
• Aligning Strategy & Sales
• Digital Marketing
• Hypothesis Testing
• Time Series Analysis
• Regression Analysis
• Machine Learning
• Marketing Strategy
• Branding & Advertising
• Risk Management
• Hedging Strategies
• Network Plotting
• Bar Charts & Time Series
• Technical Analysis of Stocks MACD
• NPV Worksheet
• ABC Analysis Worksheet
• WACC Worksheet
• Porter 5 Forces
• Porter Value Chain
• Amazing Charts
• Garnett Chart
• HBR Case Solution
• 4P Analysis
• 5C Analysis
• NPV Analysis
• SWOT Analysis
• PESTEL Analysis
• Cost Optimization

Airbus vs. Boeing (A)

• Global Business / MBA EMBA Resources

Next Case Study Solutions

• Lufthansa Case Study Solution
• Lufthansa: To Hedge or Not to Hedge... Case Study Solution
• Airport Privatisation Case Study Solution
• Swissair's Alliances (A) Case Study Solution
• Airlines' Flexibility in Facing Regulatory Uncertainty: To Anticipate or Adapt Case Study Solution

Previous Case Solutions

• Airbus vs. Boeing (A): Turbulent Skies Case Study Solution
• Preparing for China's Entry to the WTO: China's Airline Industry Case Study Solution
• Antrix Corporation Limited: A strategy for the global market Case Study Solution
• Open Skies: Allocation of Landing Slots at Hong Kong Airport Case Study Solution
• Food for thought: The "Junk Food" Act in Peru Case Study Solution

Predictive Analytics

June 9, 2024

Popular Tags

Case study solutions.

Case Study Solution | Assignment Help | Case Help

Airbus vs. boeing (a) description.

Looks at the development of the competitive actions between Airbus and Boeing from 1992 to 2006. Begins with the question of whether Airbus and Boeing should collaborate on the development of a VLCT (Very Large Commercial Transport) or whether Airbus should develop their own. The case series moves through to the events thereafter of Airbus' decision to pursue the A380 and Boeing's decision relating to developing a stretch 747.

Case Description Airbus vs. Boeing (A)

Strategic managment tools used in case study analysis of airbus vs. boeing (a), step 1. problem identification in airbus vs. boeing (a) case study, step 2. external environment analysis - pestel / pest / step analysis of airbus vs. boeing (a) case study, step 3. industry specific / porter five forces analysis of airbus vs. boeing (a) case study, step 4. evaluating alternatives / swot analysis of airbus vs. boeing (a) case study, step 5. porter value chain analysis / vrio / vrin analysis airbus vs. boeing (a) case study, step 6. recommendations airbus vs. boeing (a) case study, step 7. basis of recommendations for airbus vs. boeing (a) case study, quality & on time delivery.

100% money back guarantee if the quality doesn't match the promise

100% Plagiarism Free

If the work we produce contain plagiarism then we payback 1000 USD

Paypal Secure

All your payments are secure with Paypal security.

300 Words per Page

We provide 300 words per page unlike competitors' 250 or 275

Free Title Page, Citation Page, References, Exhibits, Revision, Charts

Case study solutions are career defining. Order your custom solution now.

Case Analysis of Airbus vs. Boeing (A)

Airbus vs. Boeing (A) is a Harvard Business (HBR) Case Study on Global Business , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. Airbus vs. Boeing (A) is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. Airbus vs. Boeing (A) case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. Airbus vs. Boeing (A) will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

Airbus vs. Boeing (A) case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Global Business, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of Airbus vs. Boeing (A), is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The Airbus vs. Boeing (A) case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Global Business Solutions

In the Texas Business School, Airbus vs. Boeing (A) case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – Airbus vs. Boeing (A)

Step 1 – Problem Identification of Airbus vs. Boeing (A) - Harvard Business School Case Study

The first step to solve HBR Airbus vs. Boeing (A) case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Airbus Boeing is facing right now. Even though the problem statement is essentially – “Global Business” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Airbus Boeing, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the Airbus vs. Boeing (A). The external environment analysis of Airbus vs. Boeing (A) will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Airbus vs. Boeing (A) case study. PESTEL analysis of " Airbus vs. Boeing (A)" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with Airbus vs. Boeing (A) macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for Airbus vs. Boeing (A)

To do comprehensive PESTEL analysis of case study – Airbus vs. Boeing (A) , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact Airbus vs. Boeing (A)

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ Airbus vs. Boeing (A) ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Airbus Boeing is operating, firms are required to store customer data within the premises of the country. Airbus Boeing needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. Airbus vs. Boeing (A) has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Airbus Boeing in case study Airbus vs. Boeing (A)" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Airbus Boeing in case study “ Airbus vs. Boeing (A) ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Airbus Boeing in case study “ Airbus vs. Boeing (A) ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ Airbus vs. Boeing (A) ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Airbus Boeing can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at Airbus vs. Boeing (A) case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Airbus Boeing needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact Airbus vs. Boeing (A)

Social factors that impact airbus vs. boeing (a), technological factors that impact airbus vs. boeing (a), environmental factors that impact airbus vs. boeing (a), legal factors that impact airbus vs. boeing (a), step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: airbus vs. boeing (a) case study solution.

• sales & marketing ,
• leadership ,
• corporate governance ,
• Advertising & Branding ,
• Corporate Social Responsibility (CSR) ,

Amanda Watson

Leave your thought here

© 2019 Texas Business School. All Rights Reserved

USEFUL LINKS

Follow us on.

Subscribe to our newsletter to receive news on update.

Dark Brown Leather Watch

$200.00 $180.00

Dining Chair

$300.00 $220.00

Creative Wooden Stand

$100.00 $80.00

2 x $180.00

2 x $220.00

Subtotal: $200.00

Free Shipping on All Orders Over $100!

Wooden round table

$360.00 $300.00

Hurley Dry-Fit Chino Short. Men's chino short. Outseam Length: 19 Dri-FIT Technology helps keep you dry and comfortable. Made with sweat-wicking fabric. Fitted waist with belt loops. Button waist with zip fly provides a classic look and feel .

The marketplace for case solutions.

The Boeing 7E7 – Case Solution

The Boeing Company was planning to build an efficient commercial plane that will be called the "7e7" or the "Dreamliner." With a rapidly-growing market segment, the approval for the Boeing 7E7 project needed approval, taking into consideration the current market for commercial airplanes. This case study provides the opportunity for students to assess the feasibility of the said project.

​Robert F. Bruner and James Tompkins Harvard Business Review ( UV0281-PDF-ENG ) July 29, 2004

Case questions answered:

• In assigning a cost of debt from which to construct the project’s WACC, which benchmark debt did you use?
• At the end of the day, should the project be undertaken, matching WACC against IRR?
• Construct a CAPM for Boeing. What estimation period? What Equity Risk Premium (arithmetic or geometric)
• Construct a corporate cost of capital for Boeing. What cost of debt should be used?
• Construct a CAPM for the Commercial Airframe Segment. How do we allocate between Defense and Commercial Airframes? What estimation period? What Equity Risk Premium (arithmetic or geometric)?
• Construct a divisional cost of capital for Commercial Airframe. What cost of debt should be used?
• Match Commercial Airframe WACC against IRR. Create sensitivity analyses against R&D; Price; Overhead; Revenue estimates
• Construct a Sensitivity Analysis around Beta Estimation Periods to defend your contention.
• Identify contingent/qualitative options for undertaking the project.

Not the questions you were looking for? Submit your own questions & get answers .

The Boeing 7E7 Case Answers

This case solution includes an Excel file with calculations.

Date: March 13, 2022 To: The Boeing Company Subject: New Project – The Boeing 7E7

Background – the boeing company.

The Boeing Company is currently reviewing the feasibility and profitability of investing in a new project, The Boeing 7E7, a new product line in Boeing’s commercial plane family.

The project aims to make the 7E7 cover more flight ranges with less operating and manufacturing costs and more safety.

However, the project faces many obstacles, such as technical issues, financial awareness from the Board, and competition from its competitor.

Therefore, this financial analysis provides more information and advice on whether the company needs to invest in this new project.

The primary part of this analysis is to calculate the WACC for the commercial segment of Boeing. The analysis starts with calculating the unlevered beta for the defense segment of Boeing.

The financial data of Lockheed and Northrop are applied as proxies. Raytheon is not included as a proxy because only 73% of its revenues are derived from the defense segment. However, over 90% of the revenues are from the defense segment for the other two companies.

The S&P 500 index is applied in the estimation because the S&P 500 is Boeing’s index membership. The timeframe is from June 16, 1998, to June 16, 2003.

The unlevered betas for Lockheed and Northrop are 0.284 and 0.240, respectively, based on the D/E ratio. The unlevered beta for the defense segment of Boeing is estimated to be 0.262, which is the average of the unlevered betas for the proxies.

The beta of the entire company needs to be considered to calculate the unlevered beta for the commercial segment. The beta against the S&P 500 in the timeframe from June 16, 1998, to June 16, 2003, is applied to be consistent with the proxies. The unlevered beta for the entire company is 0.596.

The allocations of defense and commercial segments are 46% and 54%. The unlevered beta for the commercial segment is estimated to be 0.881, which is calculated based on the weights of the commercial and defense segments.

After levering the beta, the levered beta for the commercial segment is 1.182. The risk-free rate and risk premia are 4.56% and 5%, respectively.

According to CAPM, the cost of equity is estimated to be 10.47%. The cost of debt is expected to be 5.31%, which is the ratio of total interest to total debt. WACC for the project is 8.05%.

For the entire company, the levered beta is 0.8. The cost of equity is 8.56% based on CAPM. The WACC of Boeing is 6.80%.

The projected IRR for The Boeing 7E7 project is…

Unlock Case Solution Now!

Get instant access to this case solution with a simple, one-time payment ($24.90).

After purchase:

• You'll be redirected to the full case solution.
• You will receive an access link to the solution via email.

Best decision to get my homework done faster! Michael MBA student, Boston

How do I get access?

Upon purchase, you are forwarded to the full solution and also receive access via email.

Is it safe to pay?

Yes! We use Paypal and Stripe as our secure payment providers of choice.

What is Casehero?

We are the marketplace for case solutions - created by students, for students.

Boeing Crisis Management Case Study: A Detailed Analysis

In the fast-paced world of aerospace engineering, few companies have enjoyed the prestige and influence of Boeing.

Renowned for its innovative aircraft designs, Boeing has long been a symbol of excellence and reliability in the aviation industry.

However, even the most formidable airlines giants can stumble, and Boeing faced a monumental crisis that shook its foundation.

This blog post delves into the Boeing crisis management case study, examining how the company navigated through a storm of unprecedented proportions.

From fatal crashes to regulatory scrutiny, we unravel the complexities of the crisis and analyze Boeing’s response, shedding light on the importance of crisis management in the corporate landscape.

Let’s learn more about Boeing crisis management case study

Boeing as a prominent aerospace company

Boeing, a globally recognized aerospace company, has played a pivotal role in shaping the aviation industry for over a century.

Founded in 1916, Boeing has consistently pushed the boundaries of innovation, engineering some of the most iconic and groundbreaking aircraft in history.

From the pioneering days of commercial aviation to the modern era of space exploration, Boeing’s contributions have been instrumental in revolutionizing air travel and shaping the course of human progress.

As one of the largest aerospace manufacturers in the world, Boeing operates across multiple sectors, including commercial airplanes, defense, space, and services.

The company’s commercial aircraft division is particularly noteworthy, boasting a diverse portfolio of aircraft models that cater to the varying needs of airlines and passengers worldwide.

With a steadfast commitment to excellence and a relentless pursuit of technological advancements, Boeing has firmly established itself as a trusted partner to airlines, governments, and customers across the globe. Its aircraft have become synonymous with reliability, efficiency, and cutting-edge innovation, setting industry standards and shaping the future of flight

However, like any prominent organization, Boeing has faced its share of challenges and setbacks. In recent years, the company has been confronted with a crisis that has tested its resilience and called into question its reputation.

Background of the Boeing Crisis

Following are the key aspects of Boeing crisis and incidents that led the company towards unprecedented crisis.

Development of the Boeing 737 MAX aircraft

The Boeing 737 MAX, a narrow-body aircraft designed for fuel efficiency and enhanced performance, was a crucial addition to Boeing’s commercial aircraft lineup.

Developed as an upgrade to the highly successful Boeing 737 Next Generation (NG) series, the MAX promised increased fuel efficiency and operational cost savings, making it an attractive choice for airlines seeking to modernize their fleets.

The development of the 737 MAX began in 2011, with Boeing aiming to compete with rival Airbus’s A320neo aircraft. Key advancements included the incorporation of larger and more fuel-efficient engines, known as the LEAP-1B engines developed by CFM International, along with aerodynamic improvements and advanced avionics.

Boeing marketed the 737 MAX as a seamless transition for pilots already trained on the 737 NG, highlighting the aircraft’s commonality and familiarity. This offered airlines the opportunity to minimize training costs and streamline operations when introducing the new aircraft into their fleets.

To expedite the launch of the 737 MAX, Boeing pursued a strategy known as “minimum change, maximum benefit.” This involved making minimal alterations to the existing 737 design while maximizing performance gains through new engines and improved aerodynamics. However, this approach posed significant challenges in terms of maintaining the aircraft’s stability and handling characteristics.

As development progressed, Boeing faced pressures to bring the 737 MAX to market swiftly. The intense competition with Airbus and the demand for more fuel-efficient aircraft led to a compressed timeline, which put strain on the engineering and certification processes.

The Federal Aviation Administration (FAA) granted the 737 MAX its certification in March 2017, paving the way for deliveries to commence. Boeing anticipated that the 737 MAX would be a game-changer for the company, reaffirming its dominance in the narrow-body aircraft market.

Little did Boeing know that the development and subsequent introduction of the 737 MAX would soon be marred by a series of devastating events that would test the company’s crisis management capabilities to their limits.

Two fatal crashes involving the 737 MAX

The Boeing 737 MAX was thrust into the global spotlight following two tragic and highly publicized crashes that resulted in the loss of hundreds of lives. These crashes were:

Lion Air Flight 610 (October 29, 2018)

Lion Air Flight 610, a scheduled domestic flight in Indonesia, crashed into the Java Sea shortly after takeoff from Jakarta. The aircraft involved was a Boeing 737 MAX 8. All 189 passengers and crew on board perished in the accident. The investigation revealed that erroneous data from a malfunctioning angle of attack sensor triggered the aircraft’s Maneuvering Characteristics Augmentation System (MCAS), an automated flight control system designed to enhance pitch stability. The repeated activation of MCAS caused the aircraft’s nose to be pushed down, overpowering the pilots’ attempts to regain control. This tragic event raised concerns about the 737 MAX’s flight control system and its potential impact on flight safety.

Ethiopian Airlines Flight 302 (March 10, 2019)

Ethiopian Airlines Flight 302, a scheduled international flight from Ethiopia to Kenya, crashed shortly after takeoff from Addis Ababa. The aircraft involved was a Boeing 737 MAX 8, similar to the Lion Air aircraft. The crash claimed the lives of all 157 passengers and crew on board. Investigations into the accident indicated similar circumstances to the Lion Air crash, with the MCAS system being implicated once again. The data from the flight data recorder and cockpit voice recorder pointed to a faulty angle of attack sensor triggering the MCAS, leading to a nosedive that the pilots were unable to counteract.

Investigations and its Results

These two devastating crashes prompted worldwide alarm and raised serious questions about the safety of the Boeing 737 MAX. As a result, regulatory authorities around the globe, including the Federal Aviation Administration (FAA) in the United States, grounded the entire 737 MAX fleet pending further investigation and the implementation of appropriate safety measures.

Multiple investigations were launched to determine the root causes of the accidents. These investigations involved aviation authorities, Boeing, airlines, and other industry experts. The primary focus was on understanding the design and functionality of the MCAS system, the training provided to pilots, the certification process, and potential lapses in safety oversight.

The investigations revealed critical issues, including shortcomings in the design and operation of the MCAS system, inadequate pilot training regarding the system’s functionality and potential failure modes, and concerns about the regulatory processes surrounding the certification of the 737 MAX. The findings of these investigations had far-reaching implications for Boeing, the aviation industry, and the future of the 737 MAX aircraft.

Media across the world widely reported on Boeing crisis after incidents of two crashes .

Analysis of Boeing’s Crisis Management Approach 

Boeing’s initial handling of the 737 MAX crisis was met with widespread criticism and scrutiny. Several key aspects of their approach can be evaluated:

Delayed Acknowledgment

Boeing’s initial response was perceived by many as slow and lacking in transparency. It took several days for Boeing to issue a statement expressing condolences and acknowledging the tragedies. This delay eroded public trust and raised concerns about Boeing’s commitment to transparency and accountability.

Lack of Transparency

Boeing’s delayed acknowledgment of the accidents and limited transparency surrounding the issues with the MCAS system undermined public trust and raised concerns about the company’s commitment to safety. The perception of secrecy and withholding of critical information further eroded confidence in Boeing’s crisis management approach.

Boeing was criticized for not being forthcoming with information about the MCAS system and its potential risks. It was revealed that Boeing had not disclosed the existence of the MCAS system to pilots or airlines prior to the accidents. This lack of transparency raised concerns about the adequacy of the information provided to operators and the extent of their understanding of the system’s functionality and potential failure modes.

Confidence in the Aircraft

In the immediate aftermath of the accidents, Boeing maintained confidence in the safety of the 737 MAX. The company initially stated that the aircraft was airworthy and did not require any additional pilot training beyond what was already provided. This response created a perception that Boeing was downplaying the severity of the situation and prioritizing commercial interests over safety.

Minimal Engagement with Stakeholders

Boeing’s initial response seemed to lack proactive and open engagement with key stakeholders, including regulators, airlines, and the public. Insufficient communication and consultation with these parties created an impression of disconnection and a failure to prioritize their concerns and perspectives.

Inadequate Crisis Communication

Boeing’s communication strategy during the early stages of the crisis was deemed reactive and insufficient. The company’s messaging lacked empathy and failed to address the severity of the situation adequately. This approach fueled speculation and contributed to a perception that Boeing was more concerned with protecting its brand than addressing the safety concerns raised by the accidents.

Overemphasis on Commercial Interests

The initial response by Boeing was perceived by some as prioritizing commercial interests over safety. Maintaining confidence in the aircraft’s airworthiness without additional pilot training raised questions about Boeing’s commitment to putting safety first. This perception further eroded trust in the company’s crisis management efforts.

Regulatory Relations and Oversight

The crisis also shed light on concerns surrounding the relationship between Boeing and regulatory authorities, particularly the FAA. Questions were raised about the level of oversight and the certification process for the 737 MAX. The perception of a cozy relationship between Boeing and the FAA added to the public’s skepticism regarding the independence and objectivity of safety evaluations.

Decision to continue production and delivery of the 737 MAX

The decision by Boeing to continue production and delivery of the 737 MAX aircraft during the early stages of the crisis was a subject of intense scrutiny and debate. Analyzing this decision involves considering the factors and considerations that influenced Boeing’s stance:

• Financial Implications: Boeing faced significant financial implications due to the grounding of the 737 MAX fleet. The production and delivery of aircraft generate substantial revenue for the company, and halting production would have resulted in substantial losses. Boeing likely considered the potential impact on its financial performance, stock value, and relationships with suppliers and customers when deciding to continue production.
• Confidence in Remedial Measures : Boeing believed that the software updates and additional pilot training being implemented as part of the proposed fixes for the MCAS system would address the safety concerns. They may have felt confident that these measures, once implemented, would reinstate the airworthiness of the 737 MAX and enable its safe operation. This confidence likely influenced their decision to continue production and delivery.
• Regulatory and Certification Expectations: Boeing may have also considered the expectations of regulatory authorities, particularly the Federal Aviation Administration (FAA), regarding the steps required to recertify the 737 MAX. By continuing production, Boeing may have sought to demonstrate their commitment to addressing the identified issues promptly and efficiently. This approach may have been viewed as a proactive step toward meeting regulatory expectations and expediting the return of the aircraft to service.
• Supply Chain Considerations: Halting production would have had significant implications for Boeing’s extensive global supply chain. Numerous suppliers and manufacturing partners rely on the production and delivery of the 737 MAX for their own operations and revenue. Disruptions to the supply chain could have had cascading effects on multiple stakeholders. Considering these dependencies, Boeing may have determined that continuing production, albeit at a reduced rate, would minimize disruptions throughout the supply chain.

Impact of the crisis on Boeing’s reputation and financials

The crisis surrounding the 737 MAX had a profound impact on Boeing’s reputation and financials. Let’s examine the consequences in both areas:

Reputation Impact

The 737 MAX crisis severely damaged Boeing’s reputation and eroded trust among key stakeholders, including airlines, passengers, regulators, and the general public. The accidents and subsequent revelations about the aircraft’s design and certification processes raised questions about Boeing’s commitment to safety and transparency.

Financial Impact

Grounding and Production Halt: The grounding of the 737 MAX fleet resulted in a halt in deliveries and production, leading to significant financial losses for Boeing. The company had to store and maintain grounded aircraft, face cancellations and delays in orders, and adjust its production schedules.

Order Cancellations

Boeing experienced a substantial number of order cancellations for the 737 MAX from airlines and leasing companies. The loss of these orders translated into reduced revenue and affected the company’s long-term sales projections.

Boeing’s communication strategy during the crisis

The effectiveness of Boeing’s communication strategy during the 737 MAX crisis can be evaluated based on several key factors:

• Timeliness: Boeing’s initial response to the crisis was delayed, which had a negative impact on its effectiveness. The company took several days to issue public statements acknowledging the accidents and expressing condolences. This delay resulted in a perception of unresponsiveness and lack of transparency, eroding public trust.
• Transparency and Openness: Boeing’s communication strategy during the early stages of the crisis was criticized for lacking transparency. The company faced allegations of withholding critical information from regulators, airlines, and the public. The limited disclosure and perceived secrecy fueled speculation and further eroded trust in Boeing’s crisis management approach.
• Clarity of Messaging: The clarity of Boeing’s messaging during the crisis was also a concern. There were instances where the company downplayed the severity of the situation and maintained confidence in the airworthiness of the 737 MAX without acknowledging the need for additional pilot training or design changes. This approach created confusion and raised questions about Boeing’s commitment to safety.
• Stakeholder Engagement: Boeing’s communication strategy faced criticism for its limited engagement with key stakeholders, including regulators, airlines, and the families of the crash victims. Insufficient communication and consultation with these stakeholders created a perception of disconnection and a failure to address their concerns and needs adequately.
• Crisis Management Updates: Boeing’s efforts to provide regular updates and progress reports regarding the investigation, the proposed fixes, and the recertification process were essential. However, there were instances where the information provided was seen as incomplete or lacking in transparency, fueling skepticism and undermining the effectiveness of their communication strategy.

Legal and regulatory challenges faced by Boeing

Boeing faced significant legal and regulatory challenges as a result of the 737 MAX crisis. Let’s examine some of the key challenges:

• Legal Liability: Boeing faced numerous legal challenges, including lawsuits from the families of the crash victims, airlines seeking compensation for financial losses, and investors alleging securities fraud. The lawsuits alleged negligence, product liability, wrongful death, and other claims against Boeing. The company had to navigate complex legal proceedings, potentially leading to substantial financial settlements and damage awards.
• Regulatory Investigations: Multiple regulatory authorities conducted investigations into the design, certification, and safety of the 737 MAX. The primary focus was on the Federal Aviation Administration (FAA), which faced scrutiny for its oversight of Boeing and the certification process. Other countries’ aviation authorities, such as the European Union Aviation Safety Agency (EASA), also conducted independent reviews. These investigations aimed to determine the extent of any regulatory lapses and evaluate the adequacy of the aircraft’s design and certification.
• Certification and Reapproval Process : The grounding of the 737 MAX led to a lengthy recertification process. Boeing had to work closely with regulatory agencies to address the identified safety concerns, implement software updates, and enhance pilot training requirements. The process involved rigorous testing, inspections, and demonstration of compliance with regulatory standards before the aircraft could be cleared to fly again. The recertification process required coordination between Boeing, regulatory authorities, and international aviation bodies, adding complexity and scrutiny to the company’s operations.
• Regulatory Reforms: The crisis also prompted calls for regulatory reforms to improve safety oversight and the certification process. There were concerns about the level of independence and objectivity in the relationship between Boeing and the FAA. Governments and regulatory agencies around the world were under pressure to strengthen safety regulations, enhance oversight, and ensure transparency to prevent similar incidents in the future.
• Increased Regulatory Scrutiny : Boeing faced heightened regulatory scrutiny beyond the 737 MAX. Inspections and audits of other Boeing aircraft models, manufacturing facilities, and quality control processes were conducted to ensure compliance with safety standards. This broader scrutiny affected the company’s operations and required additional resources to address any identified issues.

Corrective measures implemented by Boeing to address the crisis

In response to the 737 MAX crisis, Boeing implemented several corrective measures aimed at addressing the identified issues and restoring confidence in the aircraft. Let’s analyze some of these measures:

• Software Updates: Boeing developed and implemented software updates to address the MCAS system’s design flaws, which were identified as a contributing factor in the accidents. The updates included changes to the system’s activation criteria, increased redundancy, and enhanced pilot control. These updates were intended to prevent the system from engaging erroneously and provide pilots with more control over the aircraft.
• Enhanced Pilot Training: Boeing recognized the need to improve pilot training on the 737 MAX, particularly regarding the MCAS system. The company revised the training materials and procedures to ensure that pilots were adequately trained to handle any potential issues related to the MCAS system. The training enhancements aimed to provide pilots with a better understanding of the system’s functionality, failure modes, and appropriate responses.
• Collaboration with Regulators: Boeing worked closely with regulatory authorities, primarily the FAA, throughout the crisis and the subsequent recertification process. The company collaborated with regulators to address safety concerns, share technical information, and seek approval for the proposed fixes. This collaboration was aimed at ensuring that the aircraft met all regulatory requirements and regained certification for safe operation.
• Independent Review and Oversight: Boeing initiated an independent review of its processes and practices related to aircraft design, development, and certification. The review was led by experts outside the company and focused on identifying areas for improvement and strengthening safety practices. The findings and recommendations from the review were used to enhance Boeing’s internal processes and ensure better adherence to safety standards.
• Cultural and Organizational Changes: The crisis prompted Boeing to reflect on its internal culture and decision-making processes. The company acknowledged the need for cultural and organizational changes to foster a stronger focus on safety, transparency, and accountability. Boeing aimed to address any shortcomings in its culture and decision-making frameworks to prevent similar issues in the future.

Final Words

The Boeing crisis management case study surrounding the 737 MAX crisis serves as a powerful reminder to importance of prioritizing safety, timely and transparent communication, strong regulatory relationships, rigorous risk assessment, independent oversight, continuous learning, and ethical decision-making.

Boeing’s initial response to the crisis faced significant challenges, including a lack of transparency and accountability. The decision to continue production and delivery of the 737 MAX while it was under investigation also raised concerns. These missteps led to a severe impact on Boeing’s reputation and financials, including loss of trust, order cancellations, legal liabilities, and financial losses.

However, Boeing took corrective measures to address the crisis, including software updates, enhanced pilot training, collaboration with regulators, independent reviews, and organizational changes. These steps were crucial in addressing the identified issues, rebuilding trust, and ensuring the safe return of the 737 MAX to service.

About The Author

Tahir Abbas

Related posts.

10 Core Element of Change Leaders Roadmap – Explained

ITIL Change Management Roles and Responsibilities

Difference Between Change Management and Configuration Management

• Order Status
• Testimonials
• What Makes Us Different

The Boeing 777 Harvard Case Solution & Analysis

Home >> Harvard Case Study Analysis Solutions >> The Boeing 777

The Boeing 777 Case Study Solution

Cost of capital:.

The cost of capital that should be applied to the project is 21.53 percent, which is derived from multiplying the market risk premium with commercial aircraft beta of Boeing Company and then added into the risk free rate.

Risks free rate is derived from the long term United States treasury bonds whose yield on October 1990 is 8.82 percent. Reason to take the long term US Treasury bond’s yield as risk free rate is because of the fact that the US treasury bonds are considered the risk free, whose default chances are near to zero.

Market risk premium and tax rate is derived from the case. Market risk premium which is mentioned in the case, is 5.4 percent that is based on  64 years geometric average equity market risk premium, while the tax rate is 34 percent, which is mentioned in Exhibit 10 of the case.

For the purpose of deriving the commercial aircraft beta, too many calculations have been carried out in which first step is to take the overall Boeing’s company levered beta form the S&P 500 market index which shows the figure 1.37 as an imitation from the previous 12 months.

Rationale to select the 12 months levered beta is because it is showing the good reflection of the current market conditions, as the 58 months levered beta is considered the reflection of the longer picture of the company , which might include the outdated information about the company, while 60 days levered beta is considered the short term beta for the company, which might create the biasness during the analysis due to its short term fluctuations.

After that, in second step, average has been taken form three competitor’s unlevered beta for The Boeing Company in order to find the defense aircraft levered beta. Three competitors are Grumman, Northrop and Lockheed. The reason to exclude the McDonnell Douglas from this competition is its debt to equity ratio, which is much high, as a result, it is considered too risky company in competition, which does not meet the statement’s criteria.

Table 1.2 shows the levered beta for defense aircraft of Boeing Company is 0.376. By using the overall company’s beta and the beta for defense aircraft, it has been found that the levered beta for commercial aircraft is 2.353, which is used in Capital Asset Pricing Model (CAPM) formula to find the potential cost of capital (21.53 percent).

Table 1.1: Competitor’s Information

Table 1.2: Potential Cost of Capital

Sensitivity Analysis:

Table 1.3 and 1.4 show the three variables that derive the sensitivity in this project, which are the revenues of the company from this project that are based on the sales volume and sales price of the Boeing 777, and the general and admin expenses of the company form this project along with the research and development percentage over the sales of the company.

Table 1.3: Revenue Assumptions

Table 1.4: Expenditure Assumptions

It is the risky project as the extreme high assumption of IRR is below than the potential cost of capital. If the sales volume will fall from 1000 units to 700 then it will create the huge difference between the potential cost of capital and Project IRR, which might create thoughtful future problems for the company. But if it will reach the extreme high situation where research and development and general and admin expenses are at its lowest place, then the Boeing Company will be able to meet the shareholders requirements from the Boeing 777 project in future, but this will lead to the huge uncertainty and ultimately more riskiness.

Due to this high risk and uncertainty, Boeing Company’s shareholders potential cost of capital from Boeing 777 project will decrease.

Recommendations to CEO Frank Shrontz:

Investment in innovations leads to the great success in market, which helps to create and maintain the competitive advantage over competitors. That is why, it has been recommended to the CEO Frank Shrontz to continue with Boeing 777 project as it provides the positive return to the company. This aging in aircraft industry provides the opportunity to Boeing for updating its fleet for the purpose of competing successfully in the aircraft market.

After the detailed analysis of case, it has been recommended to continue the Boeing 777 project because it is fitting the gap in the company related to the passenger capacity range from 350 to 390, which is currently lacking in Boeing Company.

The IRR from the pessimistic approach (Extremely Low) is 13.6 percent, which shows a good return for the company which ultimately increase the revenues and profits for the company. In short, it has been concluded that the data supports to continue with the investment in Boeing 777 project, as it provides the positive returns in future with some other benefits to The Boeing Company...........

This is just a sample partical work. Please place the order on the website to get your own originally done case solution.

Related Case Solutions & Analyses:

Hire us for Originally Written Case Solution/ Analysis

Like us and get updates:.

Harvard Case Solutions

Search Case Solutions

• Accounting Case Solutions
• Auditing Case Studies
• Business Case Studies
• Economics Case Solutions
• Finance Case Studies Analysis
• Harvard Case Study Analysis Solutions
• Human Resource Cases
• Ivey Case Solutions
• Management Case Studies
• Marketing HBS Case Solutions
• Operations Management Case Studies
• Supply Chain Management Cases
• Taxation Case Studies

More From Harvard Case Study Analysis Solutions

• Building to a Crescendo
• Audio Lecture
• The Elcer Products Transaction: Confidential Information for Pearl Equity Partners, Spanish Version
• United Parcel Services
• Double-Double Toil And Trouble One Compounding Pharmacy S Recipe For Steroids
• Haier: Taking a Chinese Company Global in 2011
• Global Business School Network

Contact us:

Check Order Status

How Does it Work?

Why TheCaseSolutions.com?