What you need to know about Boeing's 737 Max crisis

Key Points
  • Aviation authorities around the world grounded the Boeing 737 Max planes in March following two crashes in less than five months.
  • The FAA's certification of the plane is facing multiple investigations.
  • Boeing has developed software changes for the plane but they're likely to be grounded for at least part of the summer.
People walk past a part of the wreckage at the scene of the Ethiopian Airlines Flight ET 302 plane crash, near the town of Bishoftu, southeast of Addis Ababa, Ethiopia March 10, 2019.
Tiksa Negeri | Reuters

Boeing 737 Max planes around the world remain grounded more than two months after the second of two fatal crashes of the jets that killed a total of 346 people.

Multiple investigations have since been opened, both into the crashes themselves and the regulatory process to approve the planes. Lawmakers and federal investigators are specifically examining how the Federal Aviation Administration in 2017 gave a green light to the jet — a more fuel-efficient version of Boeing's workhorse aircraft that's been flying since the late 1960s — without disclosures to pilots about a new anti-stall system, which has been implicated in the two air disasters.

Since the second crash, on March 10, the Chicago-based manufacturer's stock has lost more than 16%, closing at $353.81 Thursday, as the number of probes and lawsuits grew and Boeing suspended deliveries of its best-selling jets.

Here is a look at what is happening and what to expect with the 737 Max grounded as the busy summer travel season approaches.

Ongoing investigations

Multiple federal investigations are examining the Max and how it was approved by regulators, along with the plane's new anti-stall system, known as MCAS. Boeing is also facing lawsuits from the families of crash victims.

In March, the FBI joined an investigation of the certification process for the company's 737 Max jets. House and Senate panels have each launched investigations.

Boeing said Thursday it has developed a software update for the 737 Max, a key step in getting the aircraft flying again. The company said it completed more than 360 hours of testing on 207 flights with the updated software. It has also developed new training materials that the FAA is reviewing. The FAA requested more information, including how the pilots would operate the controls and displays in different circumstances, Boeing said.

"We're committed to providing the FAA and global regulators all the information they need, and to getting it right," CEO Dennis Muilenburg said in a statement on Thursday. "We're making clear and steady progress and are confident that the 737 MAX with updated MCAS software will be one of the safest airplanes ever to fly."

Boeing aims to make the anti-stall system less powerful and give pilots greater control. Investigators have pointed to the system as a factor in the crashes, since the jets' noses were repeatedly pushed down after the system was fed erroneous information from a sensor. The updated system will also use data from multiple sensors instead of one.

It's unclear how long the FAA will take to approve the fix and deem the planes safe to take to the skies again. In April, the FAA said Boeing's update was "operationally suitable" in an initial review, and recommended that pilots take additional computer-based training for MCAS.

Boeing has also taken a lot of heat following reports that it knew of problems with one of the safety features well before the two crashes, but did not disclose the issues to airlines or regulators until after the October Lion Air crash in Indonesia.

A group of men and boys examine electronics taken from a pile of twisted metal gathered by workers during the continuing recovery efforts at the crash site of Ethiopian Airlines flight ET302 on March 11, 2019 in Bishoftu, Ethiopia.
Jemal Countess | Getty Images

The economic toll

Airlines have already missed out on hundreds of millions of dollars in revenue after aviation authorities ordered them to ground the planes.

Southwest Airlines, which has 34 Boeing 737 Max jets in its fleet of about 750 planes, said the grounded jets contributed to $200 million in lost revenue during the first three months of the year.

American Airlines, which has 24 Maxes, has canceled at least 15,000 flights through August The cancellations due to the grounded Max each day equal about 2% of American's daily summer flying and will reduce the airline's pretax earnings this year by $350 million, the carrier said on April 26.

Boeing said its costs in the first quarter rose by $1 billion from the groundings, though it can't predict its financial performance for the rest of the year because deliveries of Max jets are on hold.

It has a backlog of more than 4,000 orders for the jet and recently cut monthly production of it from 52 to 42 planes in April.

Analysts have speculated that the company faces billions of dollars in payments to airlines and families of crash victims.

Several banks expect Boeing's production cuts to hit U.S. GDP. Wells Fargo said in April that Boeing's production cuts will reduce second-quarter GDP growth by 0.2%. Earlier in March, JP Morgan's CEO said GDP could fall by 0.6% if production of the plane is halted temporarily.

"Boeing's production cuts are large enough to negatively impact incoming reads on the economy," said Wells Fargo senior economist Sarah House.

Scrambling to restore trust

Boeing has scrambled to persuade airlines and passengers to rally behind the Max jet following the company's clumsy response to the two fatal crashes.

In an effort to win back public trust, Boeing is reportedly hiring some major public relations firms to help reintroduce the jet. On an earnings call in April, Muilenburg said that pilots would act as key messengers.

"We think a key voice in all of this will be the pilots for our airlines, and their voice is very important," he said. "That bond between the passenger and the pilot is one that's critical, and so we're working with our airline customers and those pilot voices to ensure that we can build on that going forward."

Muilenburg hasn't said there's anything wrong with the 737 Max design. Pilots and airlines have complained to Boeing for failing to provide information about new software after the first crash, as well as incomplete information about safety features in the cockpit.

Even assurances from Boeing and airlines that the planes are safe may not necessarily resonate with travelers. A Barclays' survey of airline passengers published earlier this month showed that many people will avoid the Max "for an extended period" once it's allowed to fly again, with over half of respondents saying they'd choose a different aircraft if given the choice.

However, some aviation experts have said the stigma associated with the Max, and damage to Boeing's reputation, will likely dissipate.

"If Boeing does what it needs to do to fix the problem, if the airline is certified by safety regulators and goes on to fly reliably, then the stigma that exists now will fade away," Henry Harteveldt, president of Atmosphere Research Group, told CNBC in April.

What's next

As the probes continue, the FAA plans to host other civil aviation authorities from around the world in Fort Worth, Texas on Thursday to update them on the 737 Max. The FAA was the last major air safety authority to ground the planes in March after the Ethiopian crash, drawing questions from U.S. lawmakers, consumers and some airline employees.

Also Thursday, the International Air Transport Association, an industry group that represents more than three-quarters of the world's airlines, is meeting with carriers in Montreal to discuss the aircraft and its potential return to service, and topics are likely to include how to address passenger concerns.

The FAA's acting head, Dan Elwell, faced heat from lawmakers again this week at a second congressional hearing since March that aimed to look into the crashes and the agency's longtime practice of designating company officials to help certify aircraft, in this case the Boeing 737 Max. Lawmakers say they're seeking additional information about the plane.

Congress hasn't called Muilenburg or any other Boeing executives to testify — despite a history of quickly hauling company officials to Capitol Hill to testify following public safety incidents like the Max crisis.

Congress has not yet asked Boeing CEO to testify about 737 Max concerns
Congress has not yet asked Boeing CEO to testify about 737 Max concerns