Talking Point

Max pressure

How China’s aviation regulator made it a bad week for Boeing and the FAA

Boeing-737-w

China’s CAAC banned Boeing’s 737 MAX 8, and the rest of the world’s aviation authorities followed

In 1980 the veteran Boeing engineer EE Bauer arrived in Beijing to open the US firm’s first representative office in China. According to James Fallows’ book China Airborne, the new arrival soon discovered that “every safeguard that made for reliability in an air-transport system was at odds with the Chinese model of the time”.

It was a recipe for disaster, particularly when China expanded its passenger fleet and the frequency of flights. Five commercial jets crashed in a four-month span in 1992, including an accident in which more than 140 died on a Boeing 737. As Fallows points out: “Boeing had a direct stake in improving the safety record of Chinese airlines, and felt it had a responsibility to do what it could.”

The turning point was 1997 when China Southern wanted to fly one of its new Boeing 777s from Guangzhou to Los Angeles, but the US Department of Transport was withholding permission.

In stepped Boeing. “Boeing was not the cause of the safety problems with Chinese airlines,” Fallows writes. “But Boeing decided that resolving them was partly its responsibility. In collaboration with the FAA [the US aviation regulator], it began preparing a series of seminars, tours, training sessions and briefings to connect Chinese regulators and inspectors with their counterparts in the US.

Boeing underwrote much of the cost of this effort, the author recounts. What did it discover? Aside from a preference to patch up parts, rather than replace them based on ‘flight cycles’, there were all sorts of cultural issues that needed to be addressed. One was the performance of the so-called ‘check airman’ personnel who evaluate a pilot’s fitness to fly. Boeing found that in China these inspectors were often neighbours of the pilots and didn’t want to fail anyone for ‘face’ reasons.

With careful prodding about international standards, Boeing co-opted a couple of senior local pilots to persuade the Chinese regulatory body – the CAAC – that the system needed to be overhauled. One of these pilots Yang Yuanyuan eventually became head of the CAAC (the Civil Aviation Administration of China) and he air-dropped his key allies into the safety departments of the Chinese airlines to orchestrate the much-needed changes.

“Through the next decade, Chinese commercial aviation, while expanding faster than any other country’s, was statistically among the world’s very safest,” Fallows writes.

The Boeing-driven programme was an unqualified success but the safety situation was turned on its head this week as the CAAC grounded a new class of Boeing jet on concerns about its airworthiness. It did so after a 737 MAX 8 belonging to Ethiopian Airlines crashed last Sunday, killing all 157 people on board. The CAAC’s move prompted a domino effect, creating a crisis for the US aircraft maker.

What prompted China’s aviation regulator to act?

Early reports on the accident in Ethiopia suggested similarities with another fatal crash for the same type of aircraft last October, when a Lion Air flight crashed off the coast of Indonesia, killing all 189 people onboard.

That prompted the CAAC to order domestic airlines to stop flying the 737 MAX 8 immediately.

“Given that two accidents both involved newly delivered Boeing 737-8 planes and happened during the take-off phase, they have some degree of similarity,” it advised, highlighting its “zero-tolerance” for safety risks in its airspace.

Coverage of the crash in Indonesia had centred on the possibility that the aircraft’s software put the plane into a dive and China’s aviation regulator did little to dampen the speculation that the flight control system has proved unreliable.

Li Jian, the CAAC’s deputy head, noted that the latest 737 model has “changed somewhat” since going into service two years ago, which could “bring risks and uncertainty” to the carriers that operate it, according to China Youth Daily.

But Boeing and the Federal Aviation Administration disagreed?

Boeing responded to the crisis by defending the aircraft’s airworthiness. “We have full confidence in the safety of the 737 MAX,” it said in a statement on Tuesday. “Based on the information currently available, we do not have any basis to issue new guidance to operators.”

The Federal Aviation Administration agreed, saying there was “no basis to order the grounding of the aircraft” and holding fire on any flight ban of its own.

Aviation experts cautioned that investigators hadn’t found any direct links between the two crashes. Others wondered whether the Chinese had acted prematurely, before an investigation into the accident in Ethiopia had properly begun. But the CAAC clearly didn’t want to wait any longer. Deputy head Li said that it had already written to Boeing demanding “clear answers” from its investigation into the accidents. He added that it had also asked the FAA for more information about the plane’s piloting software after the crash in Indonesia, but that it had not received a satisfactory response.

“They have had difficulty making a decision, so we took the lead,” he told reporters.

What was the impact of the CAAC directive?

The flight ban led to the grounding of 96 jets across China, primarily from the fleets of larger airlines like China Southern, Air China and Hainan Airlines, which were forced to reshuffle their schedules.

Domestic media reported that 29 flights were cancelled on the first day of the ban and another 259 required replacement with another aircraft.

The disruption was manageable because the 737 MAX 8 accounts for just 3% of the country’s fleet, Li Xiaojin, an aviation academic, told the South China Morning Post.

The more dramatic response to the CAAC’s decision came from overseas. On Monday the consensus in the international media was that fleets weren’t likely to be grounded in other countries unless the FAA changed its view, but by Tuesday that view was beginning to evolve. A growing number of airlines were choosing to take the aircraft out of service and more significantly still, civil aviation authorities around the world were starting to follow the Chinese in grounding it as well.

Indonesia was the first to follow suit, before countries like Singapore, Australia and India took similar action. The UK, France and Germany did the same and soon the whole of Europe had joined the Chinese in barring the Boeing aircraft from flying in European airspace.

Some of the regulators couched their decisions in careful terms as provisional or precautionary. But the effect was the same – suddenly it was the FAA that looked like an outlier, not the CAAC.

For the first time in its history, the FAA risked losing its status as the leader in aviation safety.

Was this a power play from the Chinese?

Aviation experts say that regulators in the country that certifies the original aircraft would normally take the lead in this kind of situation and that the Chinese have waited for guidance from the FAA in the past.

For instance, the FAA grounded Boeing’s 787 Dreamliner in January 2013 after two lithium ion-battery related fires, not allowing a return to the skies until April, when its design issues had been corrected.

However, it is unusual to ground a plane unless a specific mechanical issue or component failure has been identified, Andrew Herdman, director general of the Association of Asia Pacific Airlines, told Reuters.

That led to some second-guessing about whether the Chinese decision was solely about safety, especially at a time when negotiators are trying to resolve the trade row with Washington.

Li Jian at the CAAC refuted the claim, Yangcheng Evening News reported, saying that these were “two separate matters”.

Indeed, Boeing has seemed insulated from the trade tensions between the two superpowers, despite fears that it is an obvious target for punitive action. Only a few days earlier Boeing boss Dennis Muilenburg was even sounding hopeful about new purchases as part of the deal to end the row between Beijing and Washington

Muilenburg instead faced a crisis. Paradoxically the groundings might not be such terrible news for Chinese aerospace champion Comac, which has been talking about breaking the stranglehold that Boeing and Airbus have enjoyed over the jet market for years.

The launch of Comac’s C919, which is being marketed as China’s answer to the 737 series, has been perennially delayed and it isn’t expected to go into commercial operation until 2021 at the earliest. But a key frustration for local aerospace firms is that they have failed to convince larger carriers to consider alternatives in their fleets. Bad news for Boeing might take some of the shine off its reputation, helping its challenger from China.

Comac says it has more than 800 commitments for the C919, even though analysts are sceptical about the order book, saying it is easy for buyers to back out. What’s clearer is that international interest has been limited, with almost all of the orders coming from Chinese carriers. One of the challenges for Comac is convincing other customers that the C919 can be operated safely. And here China’s aviation regulator may have a role to play in pushing for mutually accepted standards with its peers in the United States and Europe.

Two years ago the CAAC signed a mutual recognition deal with the FAA but the industry gossip is that it has struggled to persuade the Americans to endorse some of the standards that would make it easier to sell the C919 to Western airlines.

For instance, it was reported last October that Comac has run into difficulties with approvals for the design of the C919’s flight deck, which is slowing its progress towards commercial launch.

Perhaps that is feeding into how the Chinese have handled the situation surrounding the 737s. But at the very least, the events this week have shown that the Chinese are no longer looking to Boeing for the kind of leadership that helped to revamp their safety standards in the 1990s. And their decision to get ahead of the FAA in grounding the planes is sending another important message: the Americans are no longer the world’s only authority in civil aviation.

Boeing finally gets the message…

Into this deepening crisis stepped President Donald Trump, tweeting comments that Boeing must have regarded as unhelpful. “Airplanes are becoming far too complex to fly. Pilots are no longer needed, but rather computer scientists from MIT,” he warned, adding that “split second decisions are needed, and the complexity creates danger”.

“I don’t know about you, but I don’t want Albert Einstein to be my pilot,” he went on. “I want great flying professionals that are allowed to easily and quickly take control of a plane!”

By the middle of the week Trump had gone further: he announced that his administration was grounding the planes, effectively immediately. The FAA also said that it was changing its position in light of new information about the crash in Ethiopia and Boeing backtracked too, putting out a statement that that it had recommended that all 371 of the aircraft in operation be temporarily grounded as a “proactive step out of an abundance of caution”.

Daniel Elwell, the FAA’s acting Administrator, denied that the agency had succumbed to global pressure or even that it had been compelled into action by the White House. “The decision is an emergency order to ground the airplanes and that is authority rested in the FAA with me,” he told CNBC.

That said, the aviation regulator comes out of the situation with its reputation damaged. In contrast, the Chinese are looking like much more responsible guardians of the skies. And the comparisons are being drawn at a time when the Chinese are challenging American leadership in other areas, including the ongoing battle over Huawei’s contracts for next-generation telecom networks , where both countries are lobbying other nations frantically to support their positions (see our article on the Battle of Barcelona in WiC442).

Boeing’s investors have also reacted badly to the week’s events, with the company’s shares dropping heavily in trading. About one in four of Boeing’s planes are currently sold to Chinese carriers and the ratio is even higher at one in three for orders for the 737. And what happens next will be crucial for the prospects of its bestselling aircraft in the world’s biggest market: another 7,700 planes will be sold there over the next 20 years, Boeing estimates, which is at least $1.2 trillion in potential sales.

Even if sales for the Chicago planemaker were to stumble significantly, the opportunity is coming too early for Comac, its Chinese challenger. Boeing’s longstanding rival Airbus is in a better position to profit. Boeing stayed just ahead in China last year, with 1,670 planes in service, compared to 1,598 for Airbus, according to data from CAPA Centre for Aviation. But maybe that ranking will reverse if Boeing doesn’t deal more effectively with the 737 crisis, and Airbus gets an unexpected chance for its rival model, the A320neo, to flourish.

Significantly the 737 does look to have lost a key cheerleader for its future sales: the occupant of the Oval Office. According to the Washington Post President Trump gave his verdict on the aircraft at a meeting on Wednesday with administration officials. The word he used: it “sucked”. Considering the White House has traditionally persuaded a lot of foreign governments to buy Boeing planes, this dismissive assessment may make future 737 sales pitches trickier.


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