Too Big to Fail

Back in 2008, during the financial crisis, we were introduced to the words: “too big to fail,” referring to banks that had to be saved because they otherwise could take down the whole economy.  The legislation that was then passed was intended to provide warning signs and protections so that, in the future, these companies couldn’t fail.

Despite all of these efforts, I think we must admit that we still have companies that are “too big” or “too important” to let them fail. One of these companies is Boeing.

Boeing got itself into deep trouble by rushing the 737 Max passenger jet into production.  The 737 airframe had been around for 20 years, and had become a big money-maker for Boeing.  In aviation, it is always quicker and easier to make changes to an existing air-frame than in asking for FAA certification for a new design.  If you build or a design a new airplane, it takes years (usually) to get it tested and flight approved.  

Boeing had kept adding seats, carrying capacity and bigger engines to the 737, but in going to the Max, they really “maxed” it out.  In order to accommodate new and larger engines, they had to move the engines forward and higher so that there was enough ground clearance.  This changed the stall and stability characteristics of the plane.  A new computer was designed to address this problem, but the needed sensors and, especially, new training on how to operate the system—were not made available to all who flew or purchased the new plane.  Two 737 Max planes went down within months of each other, and the plane was grounded.

Though not currently flying, but as one who has loved aviation having been a pilot with a commercial, instrument multi-engine rating — I found the story of the Boeing 737 Max to be especially distressing. Profitability and aircraft production targets trumped safety, and we have ended up with our premier large American aircraft company sitting on the edge of bankruptcy.  It has been a sad story.

Recently, the news has been better.  The FAA has announced its approval for the 737 Max to fly again. The aircraft’s computer control system has been improved, and all pilots must now be trained in how that works.  In addition, the federal government made the company eligible for billions of dollars in financial aid to keep Boeing afloat.

In the end, Boeing didn’t need the federal aid—just the promise of it propped up the credit markets and Boeing was able to float a multi-billion-dollar bond issue of its own.

All of this has pointed to an inconvenient truth. Some of our companies are so important to our economy and national security that we can’t let them fail.

But, all of this has pointed to an inconvenient truth.  Some of our companies are so important to our economy and national security that we can’t let them fail.  There is nothing that our adversaries like China and Russia would like to see more than a company like Boeing going under.  We can’t let that happen.

Maybe we have learned a lesson.  When it comes to air safety, the FAA must reassert its authority and its independence over the matter of certifying or re-certifying aircraft for commercial flight even if this means slowing the process down.  We will not have a robust and growing airline industry again until the flying public has the confidence and trust that the planes it flies in are, in fact, safe to fly. 

Rolland Kidder