To what extent has Boeing made effective use of marketing strategies to recuperate the loss incurred from the Boeing crash?

Boeing is a manufacturing company in America that deals with manufacture of airplanes, rockets, missiles and many other aerospace artefacts. Apart from being a manufacturing unit, they are also involved in designing of various aerospace equipment and transports which are also used in defense purposes by multiple nations. The company was established by William Boeing in the year 1916. As of now, the company is the sole trader with a monopolistic ownership in the sector of aircraft manufacturing and selling. However, the incident of air plane crash of Boeing-737 Max in 2019 in Ethiopia had considerable consequences for the business of this company. The stock prices of the company went through a decrease of around 77.13% in 2019 from a growth of around 450% in the year 2018. The pandemic after that had enhanced the challenges for them as the reduction in stock price kept continuing. In such situations, the company adopted and implemented multiple marketing strategies to overcome the situation. This exploration aims to investigate that how the use of various marketing strategies used by Boeing was effective enough to recover their business model and return back to sustainable financial growth.

The data will be collected from multiple secondary sources like –

• An article published in ‘Frontline’, an investigative journal that investigates, inquires, analyzes and reports various social, business and political issues in USA. It is a non-profit and unbiased publication. This article mainly reports the consequences and series of actions that Boeing went through after the crash. This article, titled as ‘Boeing Fatal Flaw’ was done by Frontline in association with ‘The New York Times’.
• A research article titled as – “Crisis history and hindsight: A stakeholder perspective on the case of Boeing 737-Max”4 by Wouter Jong, published in the SAGE Journals. This is an academic paper and thus considers contradictory perspectives to provide an authentic view of the situation.
• A business article-“What Boeing Has To Do To Woo Back Terrified Consumers” by Zenger News that analyzes the different actions taken by the company after the crisis situation, published in the reputed business magazine forbes.com.

To describe and explain the different actions taken by the company as marketing strategies with the purpose of recovery from the crisis situation, the idea of 4P’s of marketing – Price, Product, Place and Promotion will be referred to.

SWOT Analysis:

• The SWOT analysis will depict the internal environment of Boeing as a business organization immediate after the crash.

This analysis intends to analyze the internal environment of the organization from the year 2019 after the crash till the end of latest financial year in May, 2023.

 

Strength

• Boeing has a monopolistic market position where they are recognized as the most popular manufacturer and seller of airplanes across the globe.
• Boeing has a strong team of research and development that innovates designs with cutting edge technological growth to cater the customer needs.

 

Weakness

• Amongst all the aircrafts manufactured by Boeing till 2018, the model – ‘737 MAX’ had maximum sales. As per the financial statements on 2018, this model has contributed the maximum to the total operational profit and net earnings of the company (refer to supporting document-3, image-1). Thus, the crash of this model has led to a major decrease in the sales. As displayed in the figure below, the sales of this model became almost nil causing the company to suffer from huge financial loss.

• Boeing was accused of offering incomplete information about the new technological and software systems used in the airplane 737 MAX to the regulatory authorities of FAA (Federal Aviation Adminstration) which resulted into a criminal investigation against the company by the Department of Justice (Refer to Supporting Document-1, Paragraph-2).

 

Opportunities

• Boeing must consider that regaining the trust of public as well as the airlines who are their direct consumers is of sheer importance to them. To do so, the airlines must organize campaigns, public exhibitions and other such innovative methods to ensure that people can consider it safe to use their aircraft again. (Refer to Supporting Document-3, ‘Showing Confidence in Safety’). The employees of this company must first use the aircraft themselves to make an impression that they are risking their own lives in order to display the engagement of their own leaders and technical experts in the manufacturing.
• At the same time, the company must also consider investing more in the research and development (R&D) team to enforce more strict safety protocols and regulations. (Refer to Supporting Document-2).

 

Threats

• The company had a major legal obligation when around 150 families of the victims of the crash in Indonesia and Ethiopia has registered lawsuits against the company for their negligence causing many people to loss their lives (Refer to Supporting Document-1, ‘Lawsuits by families of crash victims’). After the crash incident, the company went through an image of negative reputation affecting their brand image and thus the lawsuits fostered more negative popularity about the company.
• The Department of Justice has announced their verdict for the case they had against Boeing after the crash due to their action and attempt to manipulate the aviation administration guidelines asking the company to pay a penalty of 2.5 billion USD. The company was already under huge loss due to decrease in sales and thus this was a major financial burden on them.

Place

• The two countries that Boeing was able to convince to lift the ban on the 737 MAX and resume flying them were Brazil and India. (Refer to Supporting Document-1, ‘The 737 Max 8 and Max 9 return to service’). This was quite contrary to the physical places where Boeing has its major market share like USA, China and Canada. This exemplifies the use of a diversification strategy to create a new market or rather focusing on the market growth in a place where the product was less demanded instead of penetrating more into an existing market where the product had huge sales.

 

Product

• Boeing has introduced more advanced models as a response to the crash crisis. The ‘angle attack sensor system’ was introduced in the flight which was a technological integration to ensure higher level of safety. The new airplanes made by them were larger than the previous model both in terms of size and carrying capacity. Additional features like – ‘display system’, control software and many more were introduced (Refer to Supporting Document-1, ‘The 737 Max 8 and Max 9 return to service’). This shows that how the company has introduced more features to upgrade their product and ensure safety in their product. All of these was able to motivate the consumers to have trust in the company again as well as comply with the legal regulatory protocols.

 

Price

• This section was not so taken care of by the company as it did not make any significant changes in their pricing models or strategies. However, it must be noted that the company already had a major financial loss and did not stand a chance to compromise with the operational profit or gross profit margin as they needed funds to generate revenues and clear their liabilities towards the penalty imposed and the families of the crash victims.

 

Promotion

• Boeing has used multiple promotional strategies to recover their reputation and thus revamp the sales. One of the major strategies was the use of empathetic communication expressing sympathy and admitting guilt of the incident by the CEO instead of trying to avoid it or escape from that. At the same time, they have also extended their cooperation towards the legal authorities and the major masterstroke was their decision to pay huge amount of penalty to the families of the crash victims.

The repeated crash of airplane in November, 2018 in Indonesia and in March 2019 in Ethiopia has been the most fatal crisis in airline industry so far which brought a manufacturing giant like Boeing to a situation where the company was about to close being suffered from loss of sales, legal challenges and most importantly, negative reputation. However, through some major marketing strategies like changing the management teams, clear sympathetic communication with the consumers, extending hands of cooperation to the legal authorities, upgrading their product to integrate more technological features that offers better safety measures and many more the company was able to recover from the situation that questioned their survival. The launch of 737 Max 10 and the huge sales it has in Southwest Airlines and United Airlines is a key indicator of their comeback after handling a terrible storm caused by a major accidental crisis in the civil aviation industry.

• “2 Pilots Escape Plane Crash as Boeing 737 Catches Fire amid Firefighting in Australia.” India Today, https://www.indiatoday.in/world/story/australia- firefighting-pilots-escape-plane-crash-boeing-737-water-bombing-plane-crash- 2331965-2023-02-08. Accessed 6 Mar. 2023.
• “737 Max Crashes: Boeing Says Not Guilty to Fraud Charge.” BBC News, 25 Jan. 2023. www.bbc.com, https://www.bbc.com/news/business-64390546.
• “Boeing Loses USD 663 Million in 4Q despite Higher Revenue.” The Economic Times, 25 Jan. 2023. The Economic Times - The Times of India, https://economictimes.indiatimes.com/news/international/business/boeing-loses-usd-663-million-in-4q-despite-higher-revenue/articleshow/97320302.cms.
• “Infographic: 737 Max: Boeing’s Problem Child.” Statista Infographics, 21 Oct. 2019, https://www.statista.com/chart/19715/boeing-737-max-orders.
• Isidore, Chris. “A 737 Crashed in China. What We Know about the Plane | CNN Business.” CNN, 21 Mar. 2022, https://www.cnn.com/2022/03/21/business/boeing-jet-crash/index.html.
• ---. “A 737 Crashed in China. What We Know about the Plane | CNN Business.” CNN, 21 Mar. 2022, https://www.cnn.com/2022/03/21/business/boeing-jet- crash/index.html.
• Jong, Wouter, and Paula Broekman."Crisis History and Hindsight: A Stakeholder Perspective on the Case of Boeing 737-Max." Public Relations Inquiry, vol. 10, no. 2, May 2021, pp. 185-96. DOI.org (Crossref), https://doi.org/10.1177/2046147X211001350.
• News, Zenger. “What Boeing Has To Do To Woo Back Terrified Consumers.” Forbes, https://www.forbes.com/sites/zengernews/2020/11/26/what-boeing-has-to-do- to-woo-back-terrified-consumers/. Accessed 6 Mar. 2023.
• “What Has Happened to Boeing Since the 737 Max Crashes.” FRONTLINE, https://www.pbs.org/wgbh/frontline/article/what-has-happened-to-boeing-since-the-737-max-crashes/.Accessed 6 Mar. 2023.

“What Has Happened to Boeing Since the 737 Max Crashes

The New York Times.

SEPTEMBER 14, 2021

By Priyanka Boghani

 

Within the span of five months, 346 people were killed in two crashes involving Boeing 737 Max planes: first off the coast of Indonesia in October 2018 and then in Ethiopia in March 2019.

 

Boeing’s Fatal Flaw, a new FRONTLINE investigation with The New York Times, examines how commercial pressures, flawed design and failed oversight contributed to those devastating tragedies and a catastrophic crisis at one of world’s most iconic industrial names.

 

Here we take a brief look at what has happened to Boeing following the crashes.

 

Replacing the CEO

Dennis Muilenburg had been CEO of Boeing since 2015. In the aftermath of the crashes, he testified before U.S. Senate and House committees in October 2019, acknowledging the fatal accidents happened “on my watch” and saying he and the company were accountable. He told the House Committee on Transportation and Infrastructure, “If we knew back then what we know now, we would have grounded [the 737 Max] right after the first accident.”

 

Two months after the congressional hearings, on Dec. 23, 2019, Muilenburg was fired by Boeing. The company described the move as “necessary to restore confidence” in Boeing “as it works to repair relationships with regulators, customers, and all other stakeholders.”

 

David Calhoun stepped into the role of CEO in January 2020.

 

A $2.5 Billion DOJ Settlement

On Jan. 7 of this year, the Department of Justice announced that Boeing would pay a $2.5 billion settlement, resolving a DOJ charge that the company had conspired to defraud the Federal Aviation Administration’s Aircraft Evaluation Group.

 

The DOJ’s criminal investigation focused on the actions of two employees who Boeing said in court documents “deceived the FAA AEG” about the Maneuvering Characteristics Augmentation System (MCAS) onboard the 737 Max — a system the DOJ said “may have played a role” in both 737 Max crashes. The DOJ said the employees’ “deception” led to information about MCAS being left out of a key document released by the FAA, as well as airplane manuals and pilot-training materials.

 

As Boeing’s Fatal Flaw recounts, congressional investigators found internal documents showing that, after Boeing realized the impact MCAS would have on pilot training and FAA certification, some Boeing employees suggested removing all references to MCAS from training manuals.

 

“Boeing’s employees chose the path of profit over candor by concealing material information from the FAA concerning the operation of its 737 Max airplane and engaging in an effort to cover up their deception,” said David P. Burns, the acting assistant attorney general of the DOJ’s criminal division when the settlement was announced.

 

The company entered into a deferred prosecution agreement with the DOJ, in which Boeing agreed to pay a nearly $244 million fine, to set up a $500-million fund for the families of people who died in the two crashes, and to pay $1.77 billion to airlines that had been affected by the 20-month grounding of the 737 Max that began in March 2019.

 

Boeing also agreed to continue cooperating with the DOJ’s Fraud Section on “any ongoing or future investigations and prosecutions” and is required to report any alleged violation of fraud laws by Boeing employees when dealing with foreign or domestic agencies, regulators or airline customers.

 

Boeing declined FRONTLINE’s request to be interviewed for the documentary. In a statement, the company said safety is its top priority and it has worked closely with regulators, investigators and stakeholders “to implement changes that ensure accidents like these never happen again.”

 

The criminal charge will be dropped in three years if the company follows the terms of the settlement.

 

House Transportation Committee Chair Peter DeFazio, D-Ore., called the settlement a “slap on the wrist” and said, “this attempt to change corporate behavior is pathetic and will do little to deter criminal behavior going forward.”

 

Lawsuits by Families of Crash Victims

By November 2019, Boeing was facing more than 150 lawsuits filed by families of people who had died in the two crashes — over 50 of the suits stemming from the Indonesian crash and about 100 from the crash in Ethiopia, according to the Associated Press’ review of federal court records.

 

In July 2020, Boeing told a U.S. federal court that claims related to 171 of the 189 people killed in the Indonesia crash were either partially or fully settled, although the settlements were not publicly disclosed.

 

This July, a lawyer representing some of the families said the pandemic had left the court cases “at least a year behind.”

 

The 737 Max 8 and Max 9 Return to Service

In the days after the second 737 Max crashed in March 2019, regulators around the world — from China to the European Union and several other countries — grounded the plane. The U.S. Federal Aviation Administration followed suit on March 13, 2019, after initially saying the planes were safe to fly.

 

When the FAA retested and approved the 737 Max 8 and Max 9, ending the grounding in November 2020, it required airlines to take the following steps before putting the planes back into service: installing new flight-control-computer and display-system software; incorporating revised flight-crew procedures; rerouting wiring; completing a test of the “angle of attack” sensor system, which had contributed to both the 2018 and 2019 crashes; and performing an operational readiness flight.

 

The FAA, in conjunction with aviation agencies from Canada, Brazil and the European Union, also concluded that pilots operating the 737 Max would need to complete special training. It is not clear who would pay for this additional training, which reversed one of Boeing’s original sales pitches to airlines for the 737 Max: that the plane would require minimal pilot training.

 

A December 2020 Senate committee report criticized Boeing and the FAA’s handling of the 737 Max recertification testing, saying that, based on whistleblower information and testimony, it appeared Boeing and FAA officials had “established a pre-determined outcome,” and that Boeing officials “inappropriately coached” test pilots in the MCAS simulator. The report alleged, “It appears, in this instance, FAA and Boeing were attempting to cover up important information that may have contributed to the 737 MAX tragedies.”

 

The FAA responded at the time, saying: “Working closely with other international regulators, the FAA conducted a thorough and deliberate review of the 737 Max.” The agency added it was “confident” the issues that led to the two crashes had been “addressed through the design changes required and independently approved by the FAA and its partners.”

 

“We have learned many hard lessons” from the crashes, Boeing said in its own statement at the time. The company said it took the committee’s findings seriously and would continue to review the report in full.

 

Following the Senate report, families of the 2019 Ethiopian crash victims wrote to the FAA and the U.S. Department of Transportation in a letter dated Dec. 22, 2020, and reviewed by Reuters, asking for the 737 Max approval to be rescinded and for an investigation to “determine whether the MAX recertification process was tainted.”

 

A Brazilian airline was the first to fly a 737 Max after regulators there followed the FAA in ungrounding the plane. On Dec. 29, 2020 — a week after the families’ letter — the 737 Max flew paying passengers in America for the first time after nearly two years of being grounded. A month later, Europe’s aviation authority also gave the 737 Max clearance to fly.

 

On Aug. 26, 2021, India lifted its ban on the 737 Max after “closely” monitoring the plane’s performance elsewhere and noting “no untoward reporting.” As of publication, the 737 Max remains grounded in China.

 

The First Flight of the 737 Max 10

On June 18 of this year, Boeing’s new model 737 Max 10 took to the skies for its first test flight. The Max 10 is larger than the Max 8, which was involved in the 2018 and 2019 crashes, and the Max 9. According to Boeing’s technical specs, the Max 10 is 14 feet longer than the Max 8 and can seat a maximum of 230 people, compared to the Max 8’s capacity of 210.

 

At the time of the test flight, Boeing was already working on additional safety features in the Max 10 requested by European regulators, according to Reuters.

 

“We’re going to take our time on this certification,” Stan Deal, who became president and CEO of Boeing’s Commercial Airplanes division in October 2019, said at the time of the Max 10’s first flight, according to The Seattle Times. “We’re committed to make further safety enhancements.”

 

The Max 10 is expected to start flying passengers in 2023.

 

Purchases of Boeing 737 Aircraft

In March 2021, Boeing received the largest order for 737 Max aircrafts since the flight ban was lifted. Southwest Airlines ordered 100 of the 737 Max 7s, “converting orders for 70 Max 8s to the smaller model,” according to the Associated Press. The airline, which maintains an all-Boeing fleet, had publicly considered ordering planes from Airbus — Boeing’s competitor — but ultimately stuck with Boeing.

 

In June, United Airlines announced what it described as the largest aircraft order in its history. It was purchasing 270 planes, 200 of them from Boeing — 50 of which would be 737 Max 8s and 150 of the new 737 Max 10. The purchase was described in news reports as “another vote of confidence” for Boeing, “accelerating a recovery” and “a boost for Boeing’s 737 MAX.” “

“ Boeing’s response after Ethiopian Airlines crash

After the Ethiopian Airlines crash, Boeing stated that the company was deeply saddened to learn of the passing of passengers and crew (March 10, 2019). Boeing responded in similar wording compared to the Lion Air crash, referring to its heartfelt sympathies and the provision of technical assistance. In neutral terms, aviation expert Robert Stengel, professor of engineering and applied sciences at Princeton University, pointed at the similarities. He stated “If you’re simply looking at circumstantial evidence, this gives you a pause, doesn’t it?” (Supplemental Appendix, statement 29). Soon after, China and Indonesia started to ground Boeing 737-Max aircrafts, followed by Ethiopian Airlines. The FAA did not want to jump to conclusions and told the New York Times that the investigation had only just begun. As passengers and pilots started to share their doubts, Boeing repeated that pilots would always be able to override the flight control, even when sensors provided erroneous data. On March 12, 2019, the European Union followed China and Indonesia, by suspending all flight operations of the Boeing 737- Max model. The FAA stuck to its earlier remarks and repeated that there was no basis to ground the aircraft (Supplemental Appendix, statement 50), accompanied by US airlines and US president Trump who regarded the plane as safe. Three US Senators put pressure on the FAA to ground the aircraft as a precautionary measure. The following day, the FAA decided to ground the plane as a temporary measure. Boeing supports the decision. Aviation expert Richard Aboulafia claimed that the FAA and Boeing were collaborating in a relationship that became too close (Supplemental Appendix, statement 68). Pilots withdrew their trust in the aircraft, while relatives called for Boeing to admit its faults. On March 18, 2019, Boeing released a statement which reminded the public of their expertise and commitment to safety. Relatives of the Lion Air crash appeared in the media and held Boeing accountable for the accident. They filed a lawsuit, claiming that “The plane was defective and in a condition that rendered it unreasonably dangerous for its intended use” (Supplemental Appendix, statement 94). In statement 111 (Supplemental Appendix), they express their disappointment in the company, as Boeing did not learn from the first incident. According to the relatives, it is “absolutely inexcusable that it takes another crash for people to kick this investigation and improvements into high gear.”

 

Indonesia’s top aviation regulatory official and aviation experts stated that both Boeing and the FAA were slow in responding to requests on April 2, 2019. He referred to them as The Americans (Supplemental Appendix, statement 114). A spokesperson for the American Airlines Pilot Union commented the system which was introduced by Boeing on the 737-Max was too aggressive (Supplemental Appendix, statement 119). On April 4, 2019, Boeing shared another statement where it commented on the preliminary report on the Ethiopian Airlines flight 302 Investigation. It repeated that flight crews will always have the ability to override the flight control system. Ethiopian Airlines confirmed (Supplemental Appendix, statement 145) that it was considering canceling its order for other 737-Max airplanes. Meanwhile, the US Transportation Secretary stated that it would not clear Boeing 737-Max for flight again until federal officials were satisfied that Boeing fixed its flawed flight control system.”

“ What Boeing Has To Do To Woo Back Terrified Consumers

Zenger News

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Nov 26, 2020,02:33am EST

 

Two years after a pair of deadly crashes, the Federal Aviation Administration has finally cleared the Boeing 737 MAX for a return to the skies.

 

That’s good news for Boeing’s business, but it’s unclear who will want the plane: Airlines already face tough times in a pandemic environment, and consumers may be scared of the MAX. Now Boeing has to find ways to regain trust in difficult circumstances.

 

Sales and Deliveries Drop

 

The 737 line had become the most popular commercial aircraft line for Boeing. That whole commercial category has been a critical one for the company, representing in 2018—its last “normal” year—60% of revenue, 66% of total earnings from operations, and three-quarters of net earnings.

 

The popularity of the narrow-body 737 had propelled Boeing’s commercial sales and kept it in strong competition with rival Airbus—until the crashes in late 2018 and early 2019. With the FAA and other global regulators grounding the MAX jets, 737 orders dropped precipitously.

 

Shipments also fell, and Airbus came out on top. With Covid-19 slashing airline traffic, the disparity only increased.

 

The pandemic was a significant issue affecting the steep drop in deliveries, but not the only one. The 737 MAX was grounded. Boeing and the FAA went back and forth over the issue as more about the design and execution of the MAX came to light.

 

The families of the victims of the Ethiopian Airlines crash of the Boeing 737 Max jet held a vigil in front of the US Department of Transportation headquarters in Washington, DC on Sept. 10, 2019, the six-month anniversary of the Ethiopian Airlines crash.

 

WASHINGTON, DC - SEPTEMBER 10: The families of the victims of the Ethiopian Airlines crash of the ... [+]THE WASHINGTON POST VIA GETTY IMAGES

 

“It’s always a problem for companies when they have a major product failure, and there’s nothing more major than causing people to die,” said Jeffrey Inman, professor of marketing and of business administration at the Joseph M. Katz Graduate School of Business at the University of Pittsburgh and editor-in-chief of the Journal of Consumer Research. “The airlines are caught up in it too. They were on the hook for billions of dollars of planes. I think the airlines are doing the right thing by offering passengers the option to rebook on other aircraft with no charge.”

 

Boeing isn’t the first corporation to alienate the public. Chipotle had an E. coli breakout in 2015, BP lost trust with its 2010 Gulf of Mexico oil spill, Sony had major cyber hacking issues with the PlayStation Network in 2011, and with the release of personal records and embarrassing emails in 2013. All are examples of massive mistakes and the worst kind of consumer reaction.

 

“It’s a playbook, but only if you play by the rules and take the steps seriously,” said Steven D. Cohen, an associate professor of business communication at the Johns Hopkins Carey Business School. “I don’t think crisis communication is broken. I think companies are giving lip service.”

 

Beyond Lip Service

 

Companies must be willing to bear pain when they cause it. Ella Rauen-Prestes, CEO of U.K.-based Fitbakes, which makes low-fat, high-protein snacks distributed through grocery and department store chains, faced upset customers during the summer.

 

Record-breaking temperatures in the U.K. caused heat in customer warehouses to sharply rise. “Everything started to melt,” Rauen-Prestes said. “It was a bit of a nightmare.” Stores returned goods or charged the company for disposal. Consumers complained on social media.

 

Fitbakes did a recall and also offered replacement shipments for customers who purchased directly. “We literally took it on the chin,” Rauen-Prestes remembered. “The good thing was the response of those people was fantastic.”

 

Fitbakes used transparency and authenticity in their actions and communications, although it may still have lost some consumers. “A customer who buys it and has to return it probably won’t buy it again,” Rauen-Prestes said.

 

Boeing has a far larger hurdle to clear: getting people to accept that an aircraft is safe.

 

“Accountability is really important from Boeing’s side,” said Alina Gavrushenko, director of marketing and public relations for on-demand air charter company Monarch Air. “It’s important to understand that the company grew from this experience and has rectified any situation or issues that could result from those risks. They need to be able to show that it’s a safe aircraft to fly.”

 

Showing safety won’t happen from talk. “Proving a null is practically impossible,” said Inman.

 

In addition to increasing spending on R&D and safety, Boeing executives have to “put their money where their mouth is” to show the public how important the issue is to them, Cohen said.

 

One thing Boeing could do is arrange a series of visits, bringing the plane to different cities and offering public tours, explaining what is different. And show company executives spending significant amounts of time on the 737 MAX themselves.

 

“If they’re willing to ride their own airplane, that would signal they consider it safe enough to put their own lives on the line,” said Cohen.

 

And “make damned sure the problem really is fixed,” say Inman. “If something else fails, people will attribute it to the failure to fix the problem.””