The Unraveling of Boeing | Blow Out | 4

0:06It's January 2020 and Dave Calhoun has flown into the Pacific Northwest on a rescue mission. Last month, as the 737 MAX crisis deepened, Calhoun and Boeing's board fired CEO Dennis Mullenberg. Now, Calhoun is the new CEO and tasked with pulling the business out of its tailspin. The 737 MAX has been grounded for 11 months now. Boeing is nursing losses of$7 billion. Its borrowing costs are higher because its credit rating's been downgraded, and the company doesn't expect the FAA will let the MAX fly again until mid-year at the earliest. But while in the new role, Calhoun's not new to Boeing. He's spent the past decade on its board, a position that's given him a ringside seat to many of the decisions that led the company to this point.

0:58But now, at the headquarters of Boeing's commercial airplane division in Renton, Washington, he's looking to rebuild trust. In a conference room with views of the overcast skies outside, the 62-year-old Calhoun feels questions from journalists on a teleconference. I believe this culture is a good one. Employees at Boeing care about safety, but their confidence right now is shaken. My job is to restore it. Journalists question why the MAX managed to reach the market with deadly flaws in its flight control system. Calhoun says, the problem isn't one of Boeing prizing savings over safety. It's due to assumptions about how pilots would react to problems during a flight, assumptions that proved fatally wrong.

1:41It's a judgment everybody wishes they hadn't made. But the media isn't the only audience he hopes to win the trust of today. He also needs to reassure thousands of Boeing employees. So, after an hour of talking to the media, he gives a webcast to the people who work in Boeing's commercial aviation division. He knows many of them are on edge about whether they'll keep their jobs. Just before Christmas, Boeing halted production of the 737 MAX. I want to reassure you that we have ruled out layoffs at the MAX assembly plant. The MAX is here to stay. I'm confident that eventually it will catch up with the Airbus A320neo.

2:21We'll win, one pilot at a time. I believe in this airplane. But belief won't be enough to get the MAX off the ground. And the crisis is far from over. In fact, it's about to get worse as a combo of groundings, canceled aircraft orders, and COVID strain Boeing's finances to the MAX.

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4:53From Wondery, I'm David Brown, and this is Business Wars.

5:20On the last episode, Boeing went all out to challenge the Airbus A320neo with a refreshed 737. And to ensure pilots could fly the new 737 MAX with minimal training, Boeing created a software system called MCAS that turned out to be seriously flawed. Now, the MAX is grounded worldwide following fatal crashes in Indonesia and Ethiopia. And with Boeing losing billions of dollars, its new CEO, Dave Calhoun, is under extreme pressure to get the plane flying again. This is Episode 4, Blowout.

6:02It's late January 2020, and Boeing's head of government operations, Tim Keating, just arrived at the headquarters of Ethiopian Airlines in Addis Ababa. And he's here on a delicate assignment. The one-year anniversary of the crash of Ethiopian Airlines Flight 302 is approaching, and a memorial ceremony for the families is planned to mark the tragedy. Boeing's agreed to pay for it, but Keating's here to ensure this anniversary doesn't reignite the fires of negative publicity. The Ethiopian Airlines team leads him into a conference room with brightly painted sea-green walls. Inside, relatives and representatives of those who died on the flight are waiting.

6:42Their conversation stops as he arrives. Boeing has pledged to spend$100 million supporting the families. But to them, it's the manufacturer of the aircraft that killed their loved ones. And Keating embodies that company. They eye him warily, wondering how Boeing hopes to stage manage their moment of commemoration in return for its money. Keating opens by promising that Boeing wishes to do all it can to support this event and make it meaningful for them. But there are restrictions. Boeing will cover each family's hotel and food for three nights. The anniversary takes place on a Tuesday, and everyone must fly out on the Sunday beforehand and leave Wednesday.

7:24There will be a limit of two representatives of each family. The relatives subject. Can those flying long distances come on Saturday to adjust to the jet lag? What if divorced parents both want to come? Or siblings? Do they get one or two hotel rooms? One relative asks to bring a therapist. Keating says Boeing has hired a company to provide therapists on site. A request to bring someone along to video the event is also denied. Boeing has that covered. What about journalists? No journalists. Several families say they don't want any Boeing representatives present for the eulogies. Keating looks surprised, then denies that request, telling the families, if we're paying for it, we'll be there.

8:05After further objections, Boeing relents and agrees to stay away. But to the families, it's clear that Boeing wants tight control over access to the memorial and how much money is spent on it. It's here for the families, but it's also got one eye fixed firmly on the cost and projecting the right public image. While Keating fine-tunes the anniversary memorial, back at Boeing head office in Chicago, CEO Dave Calhoun is trying to repair the company's battered reputation. Its latest PR disaster is the outrage over the internal Boeing communications made public by the investigation into what went wrong with the 737 MAX.

8:46In these emails and instant messages, Mark Forkner, the former chief technical pilot for the MAX and his then-colleagues at Boeing celebrate Jedi mind-tricking aviation regulators. They also discuss problems with MCAS, the software system behind the crashes. Now, a grand jury is investigating whether Forkner intentionally misled the Federal Aviation Administration. Several employees have already been questioned. Then, in January, the company released more internal communications. In these, Boeing employees' talk of the MAX is an airplane designed by clowns who are supervised by monkeys. In another message, an employee asks, would you put your family on a MAX simulator-trained aircraft?

9:34I wouldn't. After the latest revelations, Calhoun told reporters that these messages were appalling and part of a microculture that is out of step with the wider company. He promised action. So now, Boeing's cleaning house. In February 2020, three Boeing pilots who were part of Forkner's exchanges are called to their manager's office. On arrival, they are read a pre-prepared statement informing them that they're now on administrative leave. Meanwhile, Forkner's lawyer issues a statement saying his client denies there was an attempt to mislead the regulator, adding that the messages have been taken out of context and that Forkner believes the MAX is a safe aircraft.

10:15While Forkner thinks the plane is safe, the world's regulators aren't so sure. The MAX has spent the year since the Ethiopian Airlines crash grounded by regulators worldwide. Yet Boeing feels confident that the MAX will soon return to the skies. Work on the long-promised MCAS fix is in its final stretch. But then, COVID-19 strikes. With 100 ,000 employees nationwide, Boeing is America's largest manufacturer. Its activities also support millions of other jobs at airplane suppliers, who do everything from making fuselages to weaving floor carpet. And the impact of COVID on all of that is severe.

10:58The stay-at-home orders grind air travel to a halt. Boeing's stock? Nosedives. In five days, its stock loses more than 40 % of its value. It raises the possibility that Boeing will now need government support, and President Donald Trump stands ready to deliver that taxpayer bailout if necessary. One more question. You didn't have one, did you? Come on. Will the U.S. government provide financial assistance to Boeing and airplane suppliers like GE? We're looking at that. We're certainly looking at Boeing. Boeing got hit hard in many different ways. Boeing never had a problem for years. They were an incredible...

11:42It was unthinkable what happened with respect to Boeing. Unthinkable. Probably, I would consider it the greatest company in the world prior to a year ago. Now they get hit in 15 different ways and they have different management. I've met the new people running Boeing. I think it's going to be outstanding. But yeah, we have to protect Boeing. We have to absolutely help Boeing. By June 2020, COVID has brought commercial aviation to the brink of disaster. Within the U.S. alone, air travel is down almost 90%. Countries the world over are shutting their borders to stop the virus from spreading. Airlines straining to stay afloat, stop buying new planes and start canceling orders.

12:27By the end of 2020, Boeing will have lost more than a thousand orders. Faced with the industry's severe downturn, Boeing resorts to desperate measures. It holds serious talks about whether to accept President Trump's offer of a federal bailout. Republican politician Nikki Haley quits the Boeing board in protest at the potential departure from free market principles. Calhoun eventually rules out asking for the government's help. Instead, he approves a plan to borrow$25 billion from private lenders. He also announces the loss of more than 12 ,000 American jobs through buyouts and layoffs, primarily in the commercial aviation division based near Seattle.

13:08The 747 production line shuts down for good, ending the era of jumbo jets. The company also gets lower key help from the U.S. Air Force. Due to technical problems with Boeing's KC-46 tanker planes, the Air Force had been withholding payments to the company worth more than$800 million. But with the pandemic causing havoc, the Air Force agrees to release the money. It's a clear demonstration of the upside of Boeing's decision to buy McDonnell Douglas in the 90s. Its commercial division may be suffering, but its military and space operations are largely unaffected by the pandemic. And now, those operations are helping to cushion the entire company against the financial wildfire laying waste to civil aviation.

13:53Not that it's enough to keep the company in profit. In 2020, Boeing racks up losses of almost$12 billion, the largest in its history. Even so, the year ends on a high. Because on November 18, 2020, the Federal Aviation Administration finishes assessing the changes to the 737 MAX and declares it is fit to fly again. Tonight, U.S. airlines and flight crews are rallying around the 737 MAX. American is moving ahead with plans to resume passenger service as soon as December 29th, following the FAA's order ungrounding the plane. FAA Administrator Steve Dixon, a pilot, flew the MAX last month. I can tell you now that I am 100 % comfortable with my family flying on it.

14:44After nearly two years stuck on the ground, the 737 MAX is about to return to the skies. And with it back in action, and the coronavirus about to be tamed by vaccines, Boeing sees clear skies ahead. But just over the horizon, a major storm is heading its way.

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17:45it's january 7th 2021 and the 737 max is flying once more in the u.s but the fallout from its original flawed design continues here's a fox business alert just in from the Justice Department, announcement of charges against Boeing. This is for a 737 MAX fraud conspiracy, and the company has agreed to pay over$2.5 billion as a result of this. After months of investigation, the Justice Department concluded that misleading statements and half-truths by Boeing employees undermined the FAA's ability to protect the public. It accused the manufacturers' employees of choosing profit over candor and trying to cover up their deception.

18:29Deception that was only exposed after 346 people lost their lives in the 737 MAX crashes. But instead of being hauled before the courts on charges of conspiring to defraud the FAA about the MAX, Boeing's struck a deferred prosecution deal. And as part of that deal, Boeing will pay a criminal monetary penalty of more than$2.5 billion. The penalty includes a fund to compensate the crash victims and compensation to airlines who bought the 737 MAX aircraft. Boeing will also take action to improve safety oversight. And should it commit any U.S. federal felony during the next three years, Boeing will be prosecuted.

19:12In return, the Department of Justice exonerates Boeing's senior management and agrees they did not facilitate the misconduct. But while Boeing's payout saves it from being dragged before a judge, the deal doesn't protect its former employee, Mark Forkner. The 49-year-old former 737 MAX chief technical pilot who talked of Jedi mind-tricking regulators and internal messages is still under investigation by a grand jury. In the months following the deal with the Justice Department, 737 MAX flights start to resume across the world. Regulators in Brazil, Europe, and Canada joined the U.S. in clearing the plane for takeoff.

19:53Boeing is finally able to deliver to customers the 737 MAX jets that have been stuck at its own airfield since the groundings. Airlines start ordering MAXs again. There are only two manufacturers to buy this kind of plane from, and the waiting list for an Airbus A320neo is years long. Southwest Airlines orders 100 MAXs in a deal worth around$5 billion. Alaska Airlines inks a deal to add another dozen MAXs to its fleet. European low-cost carrier Ryanair announces it'll recruit 2 ,000 pilots to fly the MAXs it bought at a discount during Boeing's darkest hour. The rush of orders and deliveries launches Boeing back into profit for the first time since 2019.

20:36But as Boeing soars once again, the MAX's former chief technical pilot, Mark Forkner, is indicted on charges of deceiving air safety regulators, including the FAA. Despite all the deaths, admissions, scandal, and settlements, Forkner now stands alone. He is the only individual who worked at Boeing facing criminal charges for what happened with the 737 MAX.

21:08In October 2021, Forkner appears in a federal court in Fort Worth, Texas, to face charges of six counts of fraud. The prosecution accuses him of withholding information about the flight control system MCAS, actions they contend that led the FAA to remove mentions of MCAS from pilot manuals in training. He enters a plea of not guilty. The judge sets a trial to start the following month. And on the steps of the courthouse, his attorney tells the media his client is the fall guy for both Boeing and the FAA. Everyone who was affected by this tragedy deserved a search for the truth, not a search for a scapegoat.

21:50And if the government takes this case to trial, the truth will show that Mark did not cause this tragedy, Mark did not lie, and Mark should not be charged. But as Forkner digs in to clear his name, Boeing is rapidly putting the MAX crisis behind it. The last holdouts keeping the MAX grounded cave. In December, China ungrounds the MAX, Indonesia follows shortly after, and in early 2022, Ethiopian Airlines starts flying its 737 MAXs again. In March 2022, Forkner's trial begins. He faces charges of four counts of wire fraud, each of which could result in up to 20 years in prison. But over four days in court, the defense poke holes in the prosecution's argument.

22:39It points out that Forkner wasn't an engineer or test pilot. His job was to ensure training simulators behaved like the real aircraft and to advise the FAA on what training and information pilots would need. The defense notes that Forkner wasn't provided with documentation about how Boeing had widened the range of conditions under which MCAS would activate. He only learned of this change after the Lion Air crash. With the claim that Forkner deliberately misled the FAA undermined, the two sides rest their cases. Within two hours, the jury decides Forkner is not guilty.

23:17It's the summer of 2022, and at Boeing's new head office, CEO Dave Calhoun is playing host to journalists from the trade publication Aviation Week. Boeing's top brass left Chicago for its new home in Arlington, Virginia, two months ago. Now they work out of an office sandwiched between Ronald Reagan Airport and the Pentagon. But Calhoun's hoping to do more than showcase the company's new corporate offices to the visiting journalists. He wants to use this opportunity to fire a shot across the bows of the politicians sitting on the other side of the Potomac River in Capitol Hill. The Aviation Week team asks if Boeing is a company in disarray.

23:55The 737 MAX isn't its only problem. The arrival of its long-range 777X aircraft is suffering repeated delays. Quality issues have left the company unable to deliver any 787 Dreamliners to customers for more than a year. And the company's net debt now stands at$44 billion. Calhoun breezily rejects the idea he's leading a company in crisis. He tells the journalists that Boeing has turned the corner, but aircraft manufacturing is not an industry that turns on a dime. Turning the corner takes place over years, not weeks. Asked about Boeing's space business, he says it's too soon to know if its investment in its Starliner spacecraft will pay off.

24:36Then the journalists ask him about Boeing's new 737 MAX model, the MAX-10. It's going to be the largest model in the MAX family, capable of carrying 230 passengers. But under regulatory changes introduced following the MAX groundings, Boeing needs to update the cockpit to get the MAX 10 approved to fly, and that will be a costly change. Unless, that is, Congress agrees to waive that rule. Ask what might happen if Boeing doesn't get its way, Calhoun tells them the MAX 10 could be canceled, even though Boeing has more than 600 orders for its extra-large MAX. It's a warning to Congress. cut the red tape, or watch billions of dollars worth of exports, investment, and jobs vanish.

25:23The message is heard. Six months later, congressional leaders agree to let the new Max 10 skip the new rule. Three years after the Max crashes, normal service has resumed, but not for long.

25:42It's just after 5 p.m. on January 5th, 2024, and in Oregon, Alaska Airlines Flight 1282 just left the ground at Portland International Airport. The plane is a 737 MAX 9, and it's headed to Ontario, California, near Los Angeles. It's not a busy flight. There are 171 passengers, leaving around a quarter of the seats empty. In the row, just ahead of the mid-exit door, sits a 15-year-old boy named Jack with his seatbelt on. The plane continues its ascent, climbing towards 15 ,000 feet at speeds of 250 miles per hour. Jack turns to look at his mom, who's sitting elsewhere, when... Before he can process what happened, Jack feels his shirt being ripped from his torso.

26:29Oxygen masks tumble down from above. Air lashes his skin. He snaps his head around to his left. The headrest of his seat is gone, and instead of an exit door, there's now just sky. He feels his seat being dragged backwards towards the hole. His mother grabs him, holding him tight and pulling him towards her. As the initial depressurization eases, his mom and the passenger in the aisle seat help drag him away from the seat by the hole. Then a flight attendant gets him to a spare seat further up the plane. As he buckles up and puts on his oxygen mask, the woman in the next seat mouths something to him, but noise and wind drown out her words.