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Newsletter | Revolving Door Project Newsletter | April 17, 2024

The FAA and Flights of Financial Folly

Corporate CrackdownExecutive BranchGovernment CapacityIndependent Agencies

This newsletter was originally published on our Substack. Read and subscribe here.

Ever since a door fell off of an Alaska Airlines Boeing 737 MAX 9 midair in early January, Boeing has faced an endless parade of overdue scrutiny. There has been no shortage of coverage of why and how Boeing has gone from the poster child of American engineering quality to a firm of financiers and fatcats out to make a quick buck whenever and wherever it can. Outlets like The Seattle Times, The American Prospect, and more have published no end of disheartening (and, frankly, disturbing) reporting around the fall from glory that began when Boeing merged with McDonnell Douglas in 1997. 

What has been covered less is why and how the federal government has allowed Boeing to so drastically degenerate. There’s a niche program that has abetted Boeing’s aeronautical malfeasance: the Federal Aviation Administration’s (FAA) designee program. And while the designee program is longstanding, the FAA has become more reliant on it in recent decades, even as the need for direct scrutiny has grown.

The FAA has been both underfunded and understaffed for decades now; the agency has about five thousand fewer full time equivalent employees than it did at the turn of the century. And the FAA is responsible for a ton of work. Its purview includes managing air traffic control across all United States airports, certifying new aircraft, overseeing routine safety inspections, the licensing of pilots and mechanics, rulemaking, investigation into airlines and plane manufacturers, and enforcement actions. It supervises the people building the plane, operating the plane, flying the plane, maintaining the plane, and directing the plane into and out of the airport. In short, the FAA is responsible for just about every facet of all civilian aviation. 

That’s a lot, probably too much. So the FAA outsources a lot of the work through its designee program, which deputizes private actors to represent the agency. That’s how you wind up with Boeing employees being responsible for certifying the safety of Boeing planes. To be clear, the designee program makes a lot of sense in a lot of cases. It would be totally impractical for the FAA to need to directly supervise the training of every mechanic, pilot, and air traffic controller. And programs that do so don’t necessarily have any conflicts of interest. But clearly, manufacturers self-certifying that their planes are safe has become a serious problem, particularly in the case of Boeing, which has shown an inability to self-correct.

In 2018, two 737 MAX 8 crashes resulted in 346 deaths. This piece from The American Prospect’s Maureen Tkacic details how Boeing executives were actively trying to discourage rigorous safety inspections of the production of the 787 Dreamliner. Aviation Week produced a diagram of where auditors encountered issues with the 787. Note that it seems the only part of the plane that didn’t have issues was the outer section of the left wing:

Over the last decade, we know that there have been in-flight disasters with both the 737 MAX 8 and the 737 MAX 9, and that there were a litany of concerning issues with the 787. (The 787 also apparently has an issue where bumping a seat switch can push the pilot into the control panel because of loose switch covers.) There’s also an ongoing FAA investigation into an incident in which a Boeing 747’s engine caught fire and another into a wheel falling off of a 757, both from January of this year. Oh, and the 737 MAX 9 also has a sister class, the 737-900ER, for which the FAA mandated visual inspections because of the overlap in their manufacturing processes. So for those keeping count, that’s half a dozen models of Boeing planes that have had major safety concerns pop up. Check your B(oe)ingo card.

In recent months, Boeing has been excoriated publicly by the CEOs of both Alaska Airlines and United Airlines, with the latter considering dropping the 737 MAX 10 from its fleet expansion plans. Similarly, Southwest dropped the 737 MAX 7 from its near term plans. Alaska also said they wanted Boeing to pony up $150 million to compensate the airline for having to temporarily ground all of their MAX 9s. Boeing’s issues are so bad that even its main competitor, French manufacturer Airbus, is upset. This is reassuring; companies shouldn’t want to be competing on a level of “we don’t kill our customers.” But it really underscores just how serious Boeing’s reputational deterioration has been recently.

Boeing’s Business Practices Are Worse Than The Planes

That gets us to the hard question: what now? There’s a lot of ideas that have been tossed around, up to and including nationalizing Boeing. For our part, we’d hone in on three main issues:

  1. The incentive structures are a mess. Boeing executives have made goosing the short run stock price the overriding objective for the firm, which undermines safety inspections, especially because…
  1. …the FAA designee program is not designed to overcome corporate resistance to safety regulations. Given limited resources, sometimes outsourcing certifications can work, but it relies on the regulated firms’ willingness to play by the rules. Which means…
  1. …sometimes, the FAA needs to get its hands dirty and scrutinize companies more thoroughly. This requires additional resources, a commitment to elite accountability for any institutional rot observed, and a dedication to ensuring that the aviation industry serves the public interest.

The designee program has been around in one form or another since before the FAA. In 1973, when Congress questioned the ability of private actors to work on behalf of the FAA, there were only isolated problems. But the program was never designed to handle anything like the past decade we’ve seen from Boeing. Following the McDonnell Douglas merger, the centrality of maximizing stock market value has warped a firm that once prided itself on being run by engineers into one that treats safety certification with contempt. That’s why, during the 787 program, they chided a quality inspector for noting problems over email and creating a paper trail. It’s why they have simply stopped producing documentation that they know regulators like the FAA and the National Transportation Surface Board would ask for during investigations.

Boeing’s irresponsibility highlights the importance of two of RDP’s clarion calls: cracking down on corporations to ensure they toe the line, and the importance of a robust regulatory framework with sufficient resources to do so. 

To their credit, the Biden administration and Transportation Secretary Pete Buttigieg specifically have been far more proactive than their predecessors. Following the Lion Air and Ethiopian Airlines crashes in 2018 and 2019, the FAA and DOT leadership dragged their feet on grounding Boeing’s 737 MAX 8 aircraft for inspection, only doing so after much of the rest of the world (which would usually follow the FAA’s lead) did so. Chinese authorities—the first to implement such a policy—explicitly said they issued the guidance because the FAA hadn’t. President Trump also took the…unorthodox step of consulting Boeing’s CEO about that decision.

In contrast, the Biden FAA quickly grounded all MAX 9s just hours after the Alaska Airlines fiasco, and shortly thereafter ordered visual inspections of the 737-900ER, the MAX 9’s sister model. It ordered all airlines to complete detailed visual inspections, which turned up quite a few issues, and opened an investigation promptly. We won’t know the full extent of what the FAA’s enforcement action involves until the investigation is complete. 

While these prompt steps are encouraging, they are still insufficient. Boeing has flouted the law for years, risking the integrity of the American aviation system and the safety of its passengers in the process, all to funnel money back to shareholders. 

And while many stories of corporate misconduct can be boring and technocratic, Boeing has some pizzazz; people are going to pay attention to stories about how a company risks plane crashes just to siphon a bit of extra wealth into the pockets of Wall Street financiers. This is the type of enforcement action that is both absolutely necessary to protect people and has huge political upside.

This is Why We Need A Working Government

This saga also serves to highlight the importance of strong regulations and well-resourced enforcers. While the designee program serves important purposes, there are times when companies like Boeing need to be inspected more directly and forced to do things like actually document safety concerns instead of requiring employees to always raise them verbally. In the wake of the highly publicized plane crashes of 2018 and 2019, there were some calls for the FAA to bring all of the certification programs in-house. The then-acting Administrator estimated that would cost about $1.8 billion and would require 10,000 additional staff, which would more than double both the workforce (currently around 7,500) and the budget (currently around $1.6 billion) for the Aviation Safety division. However, that would still run into the bigger issue of hiring people with aeronautic expertise, which is the main problem the designee program was designed to address.

Despite the challenges of scaling up the FAA’s in-house certification programs, there are still steps that the FAA can take to reshape when and how the designee program works. There’s clearly fewer issues that arise from a private program that trains and certifies mechanics and has no financial conflict of interest, versus instances like Boeing where employees on the company payroll are being told by the FAA to rigorously document all safety concerns while being told by their management to do the polar opposite. 

Some of this will be a matter of Congress actually working to fix chronic under resourcing and address well known structural issues. But there are also actions that the Biden administration can begin right now, including increasing support and protection for whistleblowers, especially in the wake of the mysterious death of John Barnett, a key whistleblower about the cultural rot that undermined concerns for safety in the 787’s production. The FAA, for its part, did not do itself any favors to build trust under the Trump administration. Steve Dickson, appointed head of the FAA in the aftermath of the MAX 8 crashes, notoriously undermined a whistleblower by forcing her into psychiatric treatment while he was a Delta executive. It was so concerning that Congress voted unanimously to create a whistleblower office insulated from Dickson’s influence. Fact finding is critical to regulation, and the FAA has a lot of work to do to assure would-be whistleblowers of their safety. 

Boeing has made something of a habit out of shipping out planes that simply should not be in the sky. Leaving the safety of airline passengers up to them is no longer an option. The firm and its executives need to be taken to task for their malfeasance, and the FAA needs to be given the tools and direction to take a more hands-on approach when designees aren’t able to get the job done. Or at the very least, we need to find a way to insulate designees from the influence of their employers. 

Boeing has become a case in point of why hands-off regulatory frameworks need to be rethought and updated to rein in recidivist corporations run by executives who would rather engineer financialization than aircraft. Boeing’s planes keep getting grounded; the administration needs to stop letting Boeing’s dangerous financialized mindset fly.

Want more? Check out some of the pieces that we have published or contributed research or thoughts to in the last week: 

Corporate Attacks Against the National Labor Relations Board Could Break the Government

Let’s Be Direct (File)

Unpacking The Federal Executive Branch, A Conversation With Vanderbilt University Professor David Lewis

New Report: Congressional Appropriators & Big Tech

Democrats Must Start Distinguishing Themselves on Insurance Policy

Meet RealPage’s Revolving-Door Lobbyists

RELEASE: New Report Details How the National Association of Insurance Commissioners Impedes Effective Climate Action

Tech companies scale up MN lobbying efforts in advance of privacy bill

Congressional panels that slashed DOJ antitrust funds have cozy Big Tech ties: watchdogs

“Reprehensible”: Fossil fuel industry infiltrates civil rights convention

Corporate CrackdownExecutive BranchGovernment CapacityIndependent Agencies

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