The Economics That Made Boeing Build the 737 Max

This is a 737 MAX—a brand new airplane… almost. It has a few aspects that makes it unique. Most modern airplane have electronic pre-flight checklists. The 737 MAX uses paper checklists. Most modern airplanes can be turned on by flipping a switch. The 737 MAX uses a seven step process. Most modern airplanes have electronic on-screen warnings describing exactly what a problem is. The 737 MAX only has a warning light. Most modern airplanes are fully fly-by-wire meaning their ailerons and elevators and other flight control surfaces move by electronic signals triggering servo motors. The 737 MAX has, running from the cockpit, physical cables themselves pulling most of the flight control surfaces to move. Not all of these design elements are necessarily bad things—many pilots, in fact, prefer the fly-by-cable system, for example—but there is one other big difference between most modern airplanes and the 737 MAX. Most modern airplanes are flying up above right now, the 737 MAX is not. These design elements are all indicators of a truth about the 737 MAX—it’s a 50 year old airplane retooled, re-engined, and redesigned three times to make it what it is today. It is the oldest major commercial plane-type still being made today and it shows. Much of of the design of the 737 MAX was done by people not even alive today. The reason Boeing revamped and revamped and revamped this airplane over and over and over again has to do with the economics of the aviation industry as a whole and of one of the world’s fiercest rivalries—Boeing versus Airbus. Back in 2011, rumblings were emerging that Boeing would design an all-new single-aisle airplane to replace the rather old 737. It seemed like the logical choice that would allow the manufacturer to design a far more efficient aircraft unconstrained by the 737’s old, metallic airframe and technologies. The reason Boeing might not have chosen to scrap the 737 earlier, though, is because, to airlines, fuel efficiency matters less for their short-haul planes. That’s partially just because smaller planes fly fewer hours per day. Among American airlines, for example, the average small narrow-body plane spends 8.2 hours airborne per day while the average wide-body plane spends 11.5 hours airborne. Meanwhile, though, the average small, narrow-body plane flies 4.5 flights per day whereas the average wide-body flies just 1.5 per day. Considering small planes fly shorter routes, they spend more time on the ground unloading and loading between flights. So, with fewer hours per day in the air, the proportion of cost devoted to fuel is lower to operate small planes than big planes. Traditionally, airlines would rather have a cheap, small plane rather than an expensive, super efficient small plane. The 737 is just that—it’s a cheap, small plane. The 737-700’s list price is only $89 million and, once airlines actually negotiate an order, the real price is far less. With over 50 years of experience, Boeing has perfected the 737 manufacturing process and is therefore able to offer the plane at a relatively cheap price. At their peak, Boeing was making one 737 every 14 hours. So, in summary, when prioritizing which planes to buy, airlines are going to be more focused on upgrading their long-haul, wide-body fleets to the newest, most fuel-efficient airplanes than their small planes. In the past decade or so, though, airlines have been changing how they’ve been using narrow-body planes. Planes like the 737, a320, and 757 have long been the core of almost any airlines’ short-haul fleet, but they’ve started to be used for longer and longer flights. These smaller planes are cheaper to operate and have been getting redesigned with longer and longer range which allow airlines to operate longer routes with less demand that couldn’t fill a larger, wide-body plane. The fleet age of United’s planes, for example, indicates just this. You can see that the average age of most of their narrow-body fleet is from the late 1990’s and early 2000’s while much of their wide-body fleet was put into service in the current decade. But going back to what’s changed, you can see that with small, narrow-body planes, over the past twenty years, these planes are flying fewer and fewer flights per day while being airborne for more and more hours per day meaning they’re flying longer and longer routes. In addition, in 2011, when Boeing was deciding what to do next with the 737 program, jet fuel prices had reached close to an all-time high so airlines were more concerned than ever about fuel efficiency, even for their smaller planes. Therefore, the fuel efficiency of these small, narrow-body planes was and is becoming more and more important. That, in addition to a general need to improve efficiency over time, was why Boeing was looking to create an all new narrow-body airplane. But then reality hit. On December 1, 2010, Airbus announced that it would release a re-engined, more efficient version of their A320 family aircraft—the A320neo. Unfortunately for Boeing, the A320neo sold quite well in its first few months. It was clear that airlines wanted a more efficient small plane, and fast. Soon after, something worse happened. American airlines, which was, at the time, one of the world’s largest airlines, had no Airbus planes in 2011. All of their long haul fleet and most of their short-haul fleet was built by Boeing. On July 20, 2011, though, American announced a massive order for 460 narrow-body planes—130 Airbus a320’s, 130 Airbus a320neo’s, 100 737’s, and 100 re-engined 737’s. The press release said, American, “intends to order 100 of Boeing's expected new evolution of the 737NG, with a new engine that would offer even more significant fuel-efficiency gains over today's models.” At this point, this re-engined 737 had not been announced. American announced an order for a non-existent plane. They strong-armed Boeing into re-engining their 737 rather than building a new airplane by dangling an order of this hypothetical revamped airplane over them. It’s likely that Boeing had already agreed internally to re-engine the plane but nonetheless, why would American do that? Why would they want a less efficient, less modern re-engined 737 over a more modern, more efficient brand new narrow-body plane? Well, in short, it’s because fuel cost is far from all the cost. Pilots are generally trained to operate just one type of aircraft. Some fly the a380, some fly the 777, some fly the a320, and some fly the 737, but they don’t fly the 737-700 or 737-800 or 737-900, they fly the 737 airplane as a whole. Pilots are trained to the aircraft, not the specific aircraft variant. In general, pilots can and do switch between variants of aircraft even in any given day and are not required to do any substantial training to be certified on different aircraft variants. Crucially, the FAA has never required that 737 pilots complete any simulator training before flying new 737 variants. That’s because a 50 year-old 737 more or less flies like a 1 year-old 737. American wanted a refreshed 737 over a new plane since they already had thousands of trained and certified 737 pilots. They had no pilots for a hypothetical new narrow-body Boeing and the cost of training their pilots to a new plane would be massive. Even ignoring the training costs, though, it’s far cheaper for airlines to just have one large fleet of one type of aircraft rather than a few smaller fleets of different aircraft. That’s why budget airlines like Ryanair, EasyJet, and Southwest each operate only one aircraft type. It costs less to just have one group of pilots and mechanics that can work on all the planes and that’s why most airlines try to have as few different aircraft types as possible. So, soon after American’s order announcement, Boeing officially announced the 737 MAX. This aircraft would be 15% more fuel efficient than the previous 737 model and would therefore have a maximum range of 4,400 miles or 7,100 kilometers compared to the old 737’s 3,400 mile or 5,400 kilometer range. This would make it easily possible to operate transatlantic flights on this small, narrow-body plane. Airlines did end up taking advantage of this range to operate long, yet low-demand routes. For example, Air Canada operated transatlantic flights from Halifax and St. John’s to London Heathrow using the 737 MAX. Norwegian Airlines flew them as far as Newburgh, New York to Bergen, Norway. Gol Airlines, meanwhile, broke records with their daily 737 MAX flight all the way from Brasilia, Brazil to Miami, Florida—an up to eight hour flight. To achieve the fuel efficiency and range improvement that made these flights possible, though, Boeing had to make a crucial change to the aircraft. They had to fit bigger engines. Without getting too much into the engineering, the newest, most efficient engines are all physically larger than those of the past due to designs that have more air bypass and flow past the engine core. The problem, though, was that the 737 design was quite low to the ground. Back 50 years ago, when the aircraft was designed, this was a conscious choice. It was a feature that made it easy to load bags without a conveyor belt and maintain engines without a lift. This simplified operating to many of the less developed airports of that time. This proximity to ground was no problem for the first generation of 737 that had long and thin engines that looked like this. For the second generation, though, the 737 Classic, Boeing moved the engine further forward and up and designed its intake as non-circular to achieve more ground clearance. The next generation also kept this design, but then for the 737 MAX, they just had to fit an even larger engine. So, they put it even further forward and up in addition to adding 8 inches or 20 centimeters to the nose-gear. These changes, though, changed the aerodynamics of the plane and therefore how it handled. It would cause the plane to pitch up more than the last generation which would put it at a greater risk of stalling. So, they installed a system called MCAS—the Maneuvering Characteristics Augmentation System. This system would activate when it sensed the aircraft’s angle of attack was too high and would automatically rotate the horizontal stabilizer to cause the aircraft’s nose to pitch down. The aircraft figures out its angle of attack, though, through a sensor and if this sensor is broken, it can cause the aircraft to think it is flying at too high of an angle and self-correct. Unless the system is deactivated, it can keep pitching the aircraft down until the ground. It is this that is believed to have been the cause of the crash of Lion Air Flight 610 in October, 2018 and the crash of Ethiopian Airlines Flight 302 in March, 2019 and it is these that led to the grounding of every single 737 MAX in the world. Boeing found itself, back in 2011, in a position where it had to choose between the easy wrong or the difficult right. It had to choose between short-term and long-term gain and it chose to win now. It chose to push the limits of an old design to a point where it required correction upon correction to even make it the same plane. Given the storm of economic pressures surrounding the company in 2011, though, Boeing’s investors would not have been happy if the company had embarked on a long, expensive new aircraft design process while Airbus engulfed market share with their A320neo. Nobody would have guessed at the time, with the company and aircraft’s phenomenal safety record, that that decision would lead to a potentially faulty plane. Nobody would have guessed that the decision would potentially cost hundreds of lives. It was a hasty decision made by hasty human brains and for that, Boeing and its 737 program will suffer long-term, possibly permanent consequences.