Boeing: A Plane Wreck
The crashes of Lion Air Flight JT610 and Ethiopian Airlines Flight ET302 astounded the aviation industry, triggered numerous investigations, and resulted in a worldwide grounding of hundreds of Boeing 737 Max jets. The 737 Max is Boeing’s newest family of single-aisle airplane and the fastest-selling airplane in Boeing history, accumulating almost 4,700 orders from over 100 customers worldwide. It first obtained approval for commercial service from the Federal Aviation Administration (FAA) in March 2017. The first crash involving this Boeing model happened on 29 October 2018, when a Lion Air flight plunged into the Java Sea 12 minutes after taking off, killing all 189 passengers and cabin crew on board. A second crash occurred on 10 March 2019, when an Ethiopian Airlines flight crashed near the town of Bishoftu six minutes after take-off, killing all 157 people on board. On 13 March 2019, the FAA issued an Emergency Order of Prohibition which prohibits the operation of the 737-8 and 737-9 in the United States (U.S.). Investigators focused on a specific feature, known as the automated Manoeuvring Characteristic Augmentation System (MCAS), which might have forced both planes into a nosedive that brought them down. As investigations delved deeper into the accidents, several corporate governance issues surfaced.
The objective of this case is to facilitate a discussion of issues such as corporate culture; board effectiveness; executive remuneration; risk management; crisis management; and role of regulators.