Lever Time with David Sirota

On this week’s episode of Lever Time, David Sirota is joined by Bill McGee, a Senior Fellow for Aviation and Travel at the American Economic Liberties Project, and investigative journalist Maureen “Moe” Tkacik to discuss how the air travel industry has been transformed from the paragon of engineering and innovation into cost-cutting, regulation-dodging piggy banks for Wall Street investors. 

Last Friday, Alaska Airlines Flight 1282 experienced what could have been a deadly disaster when a plug door was ripped from the plane mid-flight. Luckily, no one was killed and there were only a few minor injuries. But this incident spotlights what critics say is a systemic problem in airline manufacturing and oversight: years of cutting costs, spurred by the Wall Street-ification of companies like aircraft manufacturer Boeing. 

This past week, The Lever reported that employees at Spirit AeroSystems, Boeing’s main subcontractor for plug doors and other parts of the frame, allegedly warned the company about safety issues but were instructed to falsify documents instead. Incidents like these may have resulted from companies like Boeing and Spirit AeroSystems chasing higher profit margins at the expense of quality manufacturing and service.

In today’s interview, David, Bill, and Moe discuss how airlines' demands to cram passengers into planes may have resulted in this past week’s Alaska Airlines technical malfunction. Bill and Moe also explain how the airline regulators at the Federal Aviation Administration have been asleep at the wheel for decades when it comes to oversight, and how the profit-driven corporate governance at companies like Boeing and Spirit AeroSystems has contributed to this sprawling crisis.

A transcript of this episode is available here.

BONUS: This past Monday's bonus episode of Lever Time Premium, exclusively for The Lever’s supporting subscribers, features our interview with journalist and sports writer Matt Brown, about how the private equity industry could soon be getting its claws into college football. If you’re a fan of college football who cares about the integrity of your favorite team, this interview goes into detail about how Wall Street could fundamentally change how college football works, for both players and fans.

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What is Lever Time with David Sirota?

From LeverNews.com — Lever Time is the flagship podcast from the investigative news outlet The Lever. Hosted by award-winning journalist, Oscar-nominated writer, and Bernie Sanders' 2020 speechwriter David Sirota, Lever Time features exclusive reporting from The Lever’s newsroom, high-profile guest interviews, and expert analysis from the sharpest minds in media and politics.

David Sirota: [00:00:00] Hey everyone, and welcome to another episode of Lever Time. I'm David Sirota. On today's show, we're going to be talking about the air travel industry. Specifically, we're going to be talking about how the past few decades have seen companies like Boeing, which manufactures aircrafts transformed from venerated icons of engineering and innovation, into cost cutting, regulation dodging, whistleblower suppressing machines of wealth redistribution, and now production defects that potentially endanger millions of passengers.

This all came to a head last week when a plug door blew off an Alaska Airlines plane mid flight. That happened after workers at one of the company's subcontractors alleged that defects have [00:01:00] become, quote, Excessive. For today's interview, I spoke with two of the country's leading aerospace industry experts who break down everything you need to know about what led to this debacle and how dangerous this situation is.

For our paid subscribers, we're also always dropping bonus episodes into our Lever Premium podcast feed. This past Monday, we published our interview with journalist and sports writer Matt Brown about how the private equity industry could soon be getting its claws into college football. If you're a fan of college football who cares about the integrity of your favorite team, you should definitely check out this interview, which goes into detail about how Wall Street could potentially change how the game works.

If you want access to our premium content, head over to levernews. com and click the subscribe button in the top right to become a supporting subscriber. That gives you access to the Lever Premium podcast feed, exclusive live events, even more in depth reporting, and you'll be directly supporting the investigative journalism that we do [00:02:00] here at The Lever.

Alright, we're going to jump right into our main story for today about the air travel industry. If you ask me, air travel has become one of the most nakedly abusive consumer experiences a person can have, particularly here in the United States. From the terrible customer service, the brutally uncomfortable flights, and airline fees that feel like straight up extortion, one of the few things most Americans can still agree on It sucks to fly, but even if you've accepted that flying sucks, the one thing we as consumers could at the very least be confident about when boarding a plane is not dying.

Well, now we may even have to worry about that. Last Friday, Alaska Airlines Flight 1282 experienced what could have been a deadly disaster when a plug door was ripped off of the plane mid flight. Though luckily no one was killed and there were only a few minor injuries, the incident spotlights what critics say is a [00:03:00] systemic problem in airline manufacturing and oversight.

The problem? Years of cutting costs and corners spurred by the wall streetification of companies like aircraft manufacturer Boeing. As we at The Lever recently reported, court documents indicate that employees at Spirit Aerosystems, which is Boeing's main subcontractor for things like plug doors. The workers at that subcontractor allegedly warned the company about safety issues, but were instructed to falsify documents instead.

This is all part of a swirling shitstorm, resulting from years of companies like Boeing and Spirit Aerosystems chasing higher and higher profit margins. And critics say that's come at the expense of quality manufacturing and service. At the center of this situation is Boeing's scandal plagued 737 MAX, which you may recall twice crashed when it was rolled out a few years [00:04:00] ago.

Despite those disasters, airlines kept buying that plane, and federal regulators kept allowing it to fly. At least until now. Last week, the FAA grounded dozens of the planes after the Alaska Airlines debacle. To review what's going on, And how this is a result of both corporate malfeasance and government deregulation.

I'm joined today by Bill McGee, a Senior Fellow for Aviation and Travel at the American Economic Liberties Project. I'm also joined by investigative journalist Mo Tekesic. They both have spent years reporting on the systemic erosion of the air travel industry. I spoke with Bill and Mo about what happened on that recent Alaska Airlines flight. We also talked about how airlines demands to cram passengers into a plane have resulted potentially in less safe flights. And we discussed how the Federal Aviation Administration has been asleep at the wheel for decades when it comes to oversight and regulation.

And of course, we also [00:05:00] talk about how the corporate governance at companies like Boeing has contributed to this sprawling crisis.

hey Bill. Hey Mo.

Bill McGee: How are you? Thanks very much for having us on.

Moe Tkacik: Always a pleasure.

David Sirota: Thanks to both of you for your reporting on, on this set of issues let's start with bill. last Friday, Alaska Airlines flight 12 82 experienced what could have been a deadly disaster when a plug door. was apparently ripped off of the plane mid flight. So, let's start right there.

What is a plug door? Why was it on this plane? What do we know about why it ended up defecting? And then, this really important question, What do plug doors have to do with airlines insistence on cramming more and more seats onto planes?

Bill McGee: Okay. So, well, to back it up, um, the FAA and most, uh, federal authorities around the world require [00:06:00] exit doors for a given number of seats. It's usually in the neighborhood of about 60 seats. So, if there are 61 people, you need a second door. So, for a manufacturer like Boeing, um, and they've been doing this for many years, by the way, for about 15 years.

It's easier for them to design a fuselage that has the maximum number of doors that would be required for an airline like, let's say, Ryanair, that crams in as many people as possible. So they, they, they build it in such a way that if an airline decides to cram in more and more seats with tighter and tighter legroom, there will be enough exits to accommodate them.

Most airlines, including Alaska and United, which operate this airplane, do not configure it for such a high density configuration. And so therefore, the door becomes extraneous and the [00:07:00] plug is just as it sounds. It's, it's, it's shaped like a door, but it's not meant to be accessed. And in fact, in the case of Alaska, most passengers probably don't even realize that there's a door behind there because there's a panel in front of it. So the fuselages, by the way, are outsourced like so much in aviation these days. It's a company called Spirit Aerosystems in, uh, in, uh, I believe it's in Kansas.

so look, I mean, the bottom line is Friday, Friday, we were all very lucky because there was no one sitting in that row and very easily as we have seen in incidents in the past, like with Aloha Airlines back in the 1980s or 90s, a flight attendant or a passenger that was not secured could have gone out that whole, um, just, and I was particularly concerned because for many years I've been advocating about the COVID 19.

That the FAA should not allow lap children, children under two, to not be restrained. If there had been an unrestrained infant within the area of that door, that would have been that. So, [00:08:00] it was lucky that there, there were some injuries, particularly that teenager who had his clothes literally ripped off his back in the row in front.

Um, no, Tremendously serious injuries and no deaths, but that was pure luck.

David Sirota: and obviously surrounding this is all the questions about the Boeing 737 MAX, which is this kind of plane. I want to get into that, but again, before we, before we get into the 737 MAX. Let's turn for a moment to Boeing. Now, most people listening to this have probably flown at least some time in their life on a Boeing plane.

Boeing is a ubiquitous brand in America. It's one of the biggest companies, uh, one of the biggest name brands in America. But as you have documented, Mo, in your reporting, Since the 1990s, Boeing has significantly transformed. As a company in ways that [00:09:00] relate to, uh, safety concerns, uh, about air travel generally and specifically the 737 max.

So for those who don't know a kind of summary, broad strokes of the transformation of Boeing from what it was to what it now is. Why don't you give us that, that summary if you can.

Moe Tkacik: Sure. Um, in 1997, Boeing acquired its primary competitor, McDonnell Douglas. McDonnell Douglas was probably insolvent. McDonnell Douglas was run by a gentleman named Henry Stonecipher, who was a notorious asshole, and he was a, a, a sort of Jack Welch, um, protégé, um, a little bit older to be a protégé, but a Jack Welch admirer, and Uh, that, that, who came from GE, he had, uh, gone, he'd had a few other gigs before that, but he was really a disciple of the [00:10:00] GE way, and he was extremely skilled at palace intrigue, so Boeing was this fantastic company that was really riding high after debuting the 777, which was the first, um, it was, it was, it was, You know, there's a great documentary about it, but, you know, it was this wonderful, um, wide body jet that, um, that was the first plane that was designed, like, entirely with computer assisted design, and, you know, it was this real, um, Icon, but Boeing had, I think, at its 737 factory, in fact, you know, they, they had stumbled on some sort of supply chain dysfunctions, you know, the type that, that sort of dog, uh, a company that is making things that have a million parts or in the 737, 777's case, it was 4 million parts, Stonecipher sees his sort of, uh, his, his, his, uh, opportunity and seizes on the dysfunction at Boeing to [00:11:00] basically take over the company.

there's, it's, there's a lot of, again, like there's a lot of palace intrigue, a lot of Wall Street, Uh, sort of courtship of, of, uh, influential analysts and influential, um, pension fund managers. Um, that, that goes into this, but Stonecipher sort of, kind of orchestrated a coup over the, the Boeing board and essentially McDonnell Douglas sizes this company.

So you have this like large, successful, iconic company taking over this, dysfunctional insolvent and, and much maligned. competitor, but the dysfunctional insolvent and much maligned competitor, um, actually ends up acquiring Boeing as, as, um, and then, and after that it was all downhill from there. And it's just been relentlessly downhill since then

David Sirota: So I, and I want to, I want to ask you that. When we say downhill, like for those who don't know about. About that trajectory. what are some of the, when we say that, [00:12:00] what are we talking about?

Moe Tkacik: So yeah, so the first, I, uh, you know, the first sort of notch on, on that, um, that sequence of events is there was a, um, the engineers decided to go on strike to save the company, um, they realized that it was going, that was in, in, um, 2000, um, the engineers at Boeing have a fully voluntary union, um, but, you know, the membership went from 40 percent to 90 percent during the strike, um, everybody sort of had, there was a lot of solidarity, everyone really supported believed that the company was going in the wrong direction.

They won some concessions, but they basically lost the war. In 2003, I think, the, um, the board finally, uh, uh, approved a new, uh, a new plane. That would be the 787 Dreamliner. And, but they approved it sort of on the cheap, so they only allocated something like seven million, uh, seven billion dollars to the, um, [00:13:00] the development of that plane, which was just woefully kind of stingy for the development of a brand new, um, airplane.

And, It immediately, um, went off the rails. What, what the board wanted to do, and this was Stonecipher's, sort of, his protégé, this guy named, Jim McNerney, who also came from GE, just like, uh, uh, Mr. Calhoun, David Calhoun, the, the Curtin the, uh, the 787 was, Just like the 737 MAX, a long running, endless saga of Unbelievable fuck ups.

Um, it was grounded, shortly after it debuted over, um, uh, batteries that were, uh, setting on fire in, in, in flight or on the runway. Um, they ended up solving that problem by, um, by just putting the batteries inside, uh, steel boxes. Um, they never really figured out what, uh, was wrong with the batteries.[00:14:00]

The 787 was, uh, something like eight years, um, late and it's 60 billion dollars over budget, but The 7, 8, 7 Actually, at the end of the day, because basically the, the engineer's union SPIA actually took control of the management at some point. The, the, the, the whole process got so dysfunctional that the engineer's union.

Was basically allowed to take de facto control of the production of the plane to actually get it out to the, um, the, uh, their customers because it wasn't happening under their dysfunctional kind of top down, heavily financialized management. If you've ever worked for a financialized, um, you know, private equity owned or hedge fund owned institution.

you know what kind of, uh, hell they're dealing with, the engineers at Boeing. Um, these are people, their, their bosses are all people who have no fucking idea what they're doing. Um, [00:15:00] but, you know, whereas if you own, if you work for a private equity owned hotel or hospital, you know, that, that's one thing.

If you work for a private equity owned, and that's essentially the Boeing business model, I mean, it's all private equity guys on that board. Calhoun comes from Blackstone. These are institutions that have to put together. A million, two million, four million parts. They have to make those things come together and fly in, in the air.

It is, um, it, it is not something that should be run by Wall Street guys. It's, it, it simply isn't. And yet that's the way, that's the way that it's been since, um. since 2003, I guess, when, when, uh, McNerney, McNerney took over. and it is, it has not changed. And, and when the first, after the first MAX crash happened in 2018 in November in, um, Indonesia, uh, David Calhoun, um, was, you know, the first to say, Hell no, we're not going to try to ground the plane.

and, and instead of [00:16:00] getting, you know, resigning from the board over that murderous, murderous decision that he took credit for because he was the chairman of the board at the time, he fixes it so that he basically kind of throws the then CEO under the bus and gets himself, um, appointed CEO.

It was very akin to Bob Rubin and Larry Summers, um, you know, making sure that they. handled the reigns of the financial crisis, even though they were, you know, arguably the two guys sort of most culpable in, in creating it. so, you know, similar, we are, we are Going to see this happen over and over again, um, in lieu of management change and that management change should have been forced by Congress and the Trump administration.

They had plenty of opportunities to do it, but they chose not to. They chose instead to take the criminal investigation that they opened after, um, the, the second max crash in [00:17:00] 2019. They, they, they widened it and then they narrowed it considerably and then they sort of, threw it under, you know, under the rug and decided to put all of the blame for those crashes on a technician, a test pilot.

Or not even a test pilot, sorry, a technical pilot that's even, even less, uh, impressive than a test pilot.

David Sirota: Yeah. And I, and I

think the, this, the 737 Situation, which is a mini saga unto itself is what I want to get into, obviously, because that's the plane at issue, but you've given a context about a company that was this venerated company that, uh, helped out with the, uh, with the space program, the Apollo space program, uh, it played a major role in that to a company now that is much, much different to say the least.

I mean, I'm wearing right now. Anybody looking on video, I'm wearing a Blue Star Airlines, t shirt, a reference to the to the movie Wall Street and the airline there. And this story [00:18:00] feels like a story out of the world of Oliver Stone's Wall Street. So I want to get into into that about the 7 37 max. Mo just mentioned the two crashes, the Indonesia crash, the Ethiopia crash.

there there had been a Warning signs in the past, it seems to me there's been like multiple sagas in this saga of the 7 37 max a, a scandal plagued, jet. I, I think the, the first question I would ask to you Bill is. How ubiquitous is the 737 Max, the plane that had this situation over Portland?

Like, is it every plane people are getting on to? Is it all throughout the, the, the American fleet, the global fleet? How, how big a product is this for Boeing?

Bill McGee: It's huge. It's huge worldwide. Um, the 737, I think it's helpful to back up a moment. the 737 was first designed during the Kennedy administration. It first started flying in [00:19:00] 1967. That airplane is over 50 years old. When a manufacturer like Boeing decides to build a new airplane from scratch, which it should have done, in all caps, in the case of the 737 MAX, instead of using a 55 year old airframe, If they have, if they want to do that, then that is a, that is a, it requires every airline that flies it to take pilots, dispatchers, mechanics offline to go through training for a brand new aircraft.

So when we look at the, the Mack saga, there's a lot of blame to go around. We can talk about the FAA. We could do a whole show on that. We could talk about Boeing and do five shows. The airlines also are culpable here because the airlines put tremendous pressure on Boeing to say, We don't want a 798. We don't want a 799.

We want the Boeing 737 with a new iteration. The problem is, the technology has gotten so much better over the years, particularly with the engines, [00:20:00] that you have larger, more powerful engines. Back in 1967, Jet bridges were very rare. So planes were built lower to the ground so you didn't have as far to go up and down staircases.

All of this is part of this saga, believe it or not. We're going back 50 years. Um, and so because of that, these larger engines on the Boeing basically created the situation that, that, that led to MCAS in order to prevent the aircraft from being tail heavy.

David Sirota: And for, and for those who don't know the, the, the MCAS system, I mean, we're getting a little technical here, but that's the, that's in a sense, the first part of this scandal, this is the software. At issue in those earlier crashes, in the Indonesia and Ethiopia crash. so, so they, they had to create this software.

As I understand it, and tell me if I'm wrong, they had to create this software, uh, in order to deal with the fact that they didn't make the investments in re architecting this 50 year old plane. They didn't want [00:21:00] to make those, uh, investments. is that basically right, that this sort of short term idea of we don't want to make big investments for the long haul, we have sort of a short term idea, is why they didn't make those changes?

Bill McGee: Right. Think of other products that are 55 years old. You wouldn't be driving a 1967 Mustang today with a new engine, right? And so, I mean, that dumbs it down a little, but not much. And so, basically, when they installed this MCAS system, the real crime was that they did not make it crystal clear to all of their airlines, all of their pilots, all over the world.

And when those two accidents happened There was, there's no question about this, there was a whisper campaign. It was never put in writing, it was never put in a press release. That, I mean, I heard it virtually every day. I saw it on, on aviation podcasts and blogs where US pilots were saying, Well, you know, these guys are third world.

I mean, it wouldn't happen with us. You know, it's really, I'm blaming the dead pilots who did not have control of their own airplane because they weren't even clear about [00:22:00] how, what the system was doing while they were all hurtling to their deaths. So, as I said, the airlines have a part in this too, that isn't as well, told about.

And that is that, you know, they put tremendous pressure to say, don't build a new airplane. And Boeing responds to its customers. Where the FAA fits in all this, well that's obviously a whole other story. And that's horrific as well.

David Sirota: Yeah, I mean, we're going to get into the FAA's, the FAA's role here. I think I want to ask Mo a follow up question on this question of Boeing not re architecting, uh, its planes. Uh, there was an interesting piece by the economist, uh, Bill Lazonik in, in the American Prospect a couple of years ago, uh, in which Bill tracked how much Boeing was investing in stock buybacks, Bill Lazonic tracks that the amount it would have cost Boeing to re architect its plane. Was roughly the amount [00:23:00] that Boeing had been taking of its revenues and devoting it to buybacks and dividends. So my question to you is how much in this transition of Boeing that you laid out for us, this corporate transition of Boeing, how much.

Of that transition, do you think resulted in company management taking resources that could have been invested in things like a safer architected plane and devoting them to shareholders on and sort of financial rewards for the owners of the company?

Moe Tkacik: It's, you cannot understate the role of this and, and, and a quote that I heard. From a source who told me that, so there was this, um, really beloved leader at Boeing, um, Alan Mulally, um, he ran the commercial, um, program for years, um, he was an engineer, he ran the 777 program, and he was passed over [00:24:00] in favor of, uh, Jim McInerney, the non engineer, um, from GE, who had also worked for Procter Gamble.

In a, you know, devastating decision. When they approved the 787, Malali was still there. He was shortly to go over to Ford, um, where he, he did a, by all accounts, a pretty good job. and he, he said in the parking lot to, to my source, he said, you know, the difference is that they used to say, the board of directors used to say, Look, you know, here's 20 billion dollars.

Don't fuck it up. And now they say, here's 20 billion. I'm going to take my 10 billion right now. You better not fuck it up. So basically saying like they're, they're, and I didn't almost understand the significance of this, but as the time went on. It, this is not profit. When you're talking about Boeing, they don't generate a profit in [00:25:00] normal terms, the, the, the, the, the amount of money that they have to invest in the, in the, um, in the research and development, the way that they get paid, um, the, the, the fact that, you know, their half of their revenues are, you know, 40 percent of the revenues at any, on any given year comes from the U.

S. government. It is not a normal cash flow situation. It's way more complicated than that, and it's And, they take it because they manipulate this, this, this way that they get their, their earnings coming in to basically take their. Portion of the earnings right out first so they, you know, give themselves a bonus first they can recognize a profit that doesn't really exist. This has been the subject of many SEC investigations that have gone nowhere.

but fundamentally they have extracted. Billions and billions. And I think that the amount that they spend on on stock buybacks and dividends, um, over that period of time was something like 65 billion. I mean, they were a buyback machine [00:26:00] between the time that the 787 was ungrounded and the time that they, uh, right after the first.

In fact, they were still buying back. They were still authorizing massive buybacks in February. February, uh, 2019, after the first MAX crash, when everybody knew full well that they had created a self hijacking plane, because that's what MCAS did. It corrected for the sort of aerodynamic instability of the plane caused by these giant engines on this, um, antiquated, uh, airframe by, by turning the nose down of the plane sort of automatically. This might have worked, but they designed the software so poorly that it would just endlessly sort of like a, like a skipping CD. It would endlessly keep turning the nose of the plane down in response to whatever the angle of attack indicator said. And if the angle of attack indicator was faulty, then it was, uh, [00:27:00] then it was just going to keep going down and down and down.

And that is what happened twice. Twice in the space of four months. Um, in in in 2018 2019. So, so yes, they, but you know, the problem is that they had taken all the money out. They had taken their share out. They'd take it. They'd given their, um, they'd sent out their dividends. They had taken their recognized their bonuses.

Um, they had done their buybacks and they really succeeded on a financial level. The stock was, um, everybody was calling for the stock to hit 500 in 2018. And they left no money. They, they left no money on the table for engineering, for, um, quality assurance. I mean, quality assurance, I think, you know, and I think that this just remains the case.

I was the first to go. Every, anyone who works in quality assurance, of course, they, um, they, uh, busted the, the union, so they, for the 787's production, they decided to move that, um, from [00:28:00] Seattle, where they'd done things for, um, since then. You know, World War Two, uh, they moved it to South Carolina, um, where they had a, uh, I think that they, they had a small fuselage, fuselage assembly plant, but basically nothing else.

They were, you know, there was a great Al Jazeera investigation in, in, I think, uh, 2017 into the, the factory in, um, in North Charleston, South Carolina. And folks are saying, listen, people are coming in here. Hi, they're hiring people out of Burger King and, you know, it was very, uh, successful because even the whistleblowers, I, I, I spoke to a few whistleblowers from, um, that plant and, and they said, listen, you know, we need. A union, but union is really a dirty word down here. You know, people are not going to trust you if you, you say, now the, um, the IAM actually did, I think that they got like about 32 percent of the vote. They haven't managed to try and, and, and, and redo that, which [00:29:00] kind of surprises me because at this point, I think that like, I think that probably the majority of the workers in that plant.

Think, hell yeah, we need a union. again, the union, um, the, the engineering union, um, saved Boeing's 787. Um, that, that program has not had, um, substantial problems, uh, since, uh, you know, since they got things under control. but the 737 MAX is another story. It's a complete and utter basket case. In this case, with these, these bolts that were maybe loose, maybe they flew off, maybe they were never installed to begin with.

That is the theory of a software engineer and pilot, um, who's a friend of mine, Greg Travis. He's written a lot of, um, of really insightful stuff on, on Boeing and its demise. Greg Travis has analyzed the photos from the, um, Alaska Airlines, flight. And he Believes that it looks as though the bolts weren't even installed in the first place.

The, the, the [00:30:00] way that the stresses, the, um, the, the witness lines on the little, um, the little inlets where the bolts should be installed. it doesn't look like the bolts were properly installed at all if, if they were installed, um, whatsoever. And this is what happens when, workers are under impossible deadline pressure.

to, to make things happen and, uh, there's no accountability and there, there's, there's, everything's go, go, go. And management doesn't care what, what the actual factory workers or the engineers have to say. And even if they did care, they wouldn't be able to understand it.

David Sirota: Well, let's let's talk about who's overseeing some of this. Now you've talked about corporate management. I want to get into the specifics here of what we do know about the Alaska air situation and now the grounding of these planes and the questions about bolts and the like. So Bill, I want to, I want to turn to you.

Moe has just referenced some of that. So, [00:31:00] so we've painted, there's this portrait of this, Uh, company, uh, that is cost cutting, that is, um, focused on buybacks, that, uh, uh, is not necessarily focused on delivering the highest quality, safest product. Uh, and we talked about the 737's initial saga of the software, uh, being a problem.

What about the construction? Of these planes. Um, apparently there have been warning signs about the 7 37 max. In December, Alaska encountered a series of issues where warning lights indicated a loss of cabin pressure on the max nine planes. Yet As far as we know, there were no orders or known inspections from the FAA, the Federal Aviation Administration, after these reports.

The question of FAA oversight, has it been lax? If so, why has it been lax? What, what do you think in hindsight should have been [00:32:00] done knowing what we know, uh, the warnings were?

Bill McGee: Well, it is such a deep rooted and systemic issue that if you want to talk about lack of FAA oversight over aviation, you really have to go back more than 40 years. Um, for me, you know, when I, when I see people politicize this and say, well, this administration or Trump or Obama, you know, for those of us that have been around, I've been around this industry since 1985, this is so deep rooted and so systemic that if you want to, if you want to, You know, play blue and red games and be political in that sense, then you can basically fault every president from Reagan to the present, to the present.

the bottom line is that the FAA is tasked with huge responsibilities. I don't think the average American really understands it. We'll put aside the fact that they operate and run the world's largest and most complex air traffic control system. Let's just put that aside. We'll put ATC on the side for a moment.

They have complete authority to oversee. [00:33:00] Aircraft manufacturers, every airline in the United States, every foreign airline that operates within the United States, every airport in the United States, every air traffic control tower in the United States, every repair facility, on and on and on, and this is an industry that is heavily, heavily, heavily outsourced.

I wrote a book about it, where there's two whole chapters just on the maintenance outsourcing. Every airline in the United States outsources its maintenance. What they used to do in house, what they call heavy maintenance, is now done in El Salvador. Mexico, Brazil, uh, Singapore, China. The fact is, the FAA has been underfunded and understaffed, not for years, not for decades, for generations.

And this is, this is larger than the FAA administrator, this is larger than the DOT secretary, whoever they happen to be at any given moment. This goes right to the White House and to the President of the United States, and on the White House staff. We, as a nation, have clearly made a decision in the way that we spend our money.

And all the things we spend it on, starting [00:34:00] with the Defense Department, we do not spend enough on FAA. And so what is the FAA supposed to do now? They are tasked with overseeing Boeing, among many other things. They don't have the staff. They don't, I mean, I've, I've interviewed over the years more than 200 frontline FAA inspectors.

Whistleblowers, some that have lost their jobs and their, their livelihoods because of this. What it comes down to is there aren't enough inspectors, and so they have something called the designee system. Anybody can read about it. You go to FAA. gov, Google FAA designee, and so Like, for example, I'm an FAA licensed aircraft dispatcher.

I spent seven years working in flight operations. I was licensed by the FAA and working for an airline. The guy who gave me the test, I took the test. It was an eight hour practical exam to become a dispatcher. I did it in the, in the basement of his house on Long Island. He was a retired guy. He didn't have a conflict of interest and he administered tests in his retirement.

I don't think in and of itself that type of thing is a bad, is a bad use of designees. [00:35:00] But when you have a mid level manager at a place like Boeing, whose mortgage is paid by their salary from Boeing, but they are also an FAA designee, this is an untenable situation. You're now supposed to go in and tell your boss, and your boss's boss, and your boss's boss, and all the way up to the CEO at Boeing, listen, you know, this widget is just not working.

This thing over here, we're gonna have to stop production. We're going to have to delay delivery of new airplanes to airlines for two months. It's going to cost billions of dollars. It's going to piss off airlines that may be thinking about going to Airbus now. And that's what very, fairly low level designees have to do.

And guess what? You know, it doesn't work. And so you have to, you know, the FAA, when they have their own inspectors, It's a different situation in some cases, in others it's not. But when you have designees, it's a system that's, that's broken from the get go. And that is [00:36:00] a big part of the MAX story, but it's a, it's a much bigger story all across the industry.

By the way, the airlines also use designees. The outside repair stations use designees. And then when you start talking about the layers of outsourcing, at one point, I tracked the maintenance on an aircraft, and I found five levels, five degrees of outsourcing. The airline sent it to company A, company A said, well, we don't, we're not good with these components, let's go into company B, on and on, until in one part, in one case, and I wrote about it in my book, there was, um, a, aircraft or not, metal as it used to be, it's composite materials, it's a composite material, similar to, to what's used in other industries, so an airport, excuse me, an aircraft repair station sent this, this, this part of an aircraft to a surf shop.

In Southern California and like some cowabunga dude that like, you know, wax surfboards all day was working on a piece of a Boeing aircraft. And when the [00:37:00] FAA inspector showed up, he said, do you have any certification, any training whatsoever on airplanes? He said, no, man, they just, you know, asked me to work on this thing.

And he said, okay, well, don't ever do it again. that's what we're talking about. We're talking about there's, you know, when you talk about who's minding the store, the answer is nobody. And so whether it's designees that have this tremendous conflict of interest or whether it's just the fact that your average FAA inspector has way too much of a, of a workload and, uh, is not given authorization and have documented all this to travel to the places where the work is being done.

you know, we, we, we largely allow self policing in this critical life and death industry. How's it working out? Well, it's not. We've been lucky and thankfully, you know, in many ways, the technology has gotten better and that's, that's helped, you know, overall with the accident rate and with the fatality rate, but you're, you're, you're really, you know, throwing the dice when you say, well, we're going to have an FAA, but, you know, as, as I documented, there's a term that's used throughout the [00:38:00] industry in the ranks of the FAA and the lower ranks in the airlines.

When I worked in the airlines 30 years ago, I heard this term. Yeah. they refer to the FAA as the Tombstone Agency. And what that means is basically that, you know, you have to wait until something happens and, and someone dies. And then we step in, right? Now, the one piece of credit I'll give to the FAA is that the other day they grounded this airplane immediately, thankfully.

Unlike the shameful example of the United States being the last country in the world to ground the MAX in 2019 after every other country had. but that's just step one. I mean, that's, you know, there's so much more to do.

David Sirota: Let's talk a little bit more about the outsourcing, the subcontracting outsourcing that you lay out. Mo, I'll turn to you. Spirit Aerosystems is the Boeing supplier. It's actually a Boeing spinoff, uh, that reportedly made the door plug at issue in the Alaska Airlines situation. As we reported at The Lever, court documents indicate that employees at Spirit [00:39:00] Aerosystems, allegedly warned That company, which is not some small company, by the way, it's a publicly traded company, but warn the company about safety issues, uh, allegedly excessive defects, but again, we're allegedly instructed to actually falsify documents, falsify what they were, what they were finding, that's according to the, to this complaint.

It's actually a shareholder lawsuit. I think the question that comes out of that is, okay. what do we know that workers either at Boeing's subcontractors or Boeing's own workforce, what do we know that they have been trying to communicate to management, whistleblowers and the like? Right? I mean, it's one thing to have hindsight and say, you know, these kinds of things shouldn't have happened in real time.

It seems to me in the spirit situation, there were documents in that court case where the workers are saying in, in contemporaneously before, uh, this situation saying, Hey, there's a problem here. Is that [00:40:00] systemic? Is that part of the pattern here?

Moe Tkacik: Absolutely, and yeah, Spirit is, used to be Boeing, you know, it's not, um, it is a separate company, it was a spin off, They had a, um, an obsession with certain corporate ratios that enabled them to recognize, you know, that, that, that, that every exec comp was, um, based on. There was a ratio that, um, that induced a lot of Boeing managers at a certain point to try and get rid of all their assets, to sell off, valuable land in Seattle, which was, um, You know, not, not too wise, uh, over the long term to, uh, to divest certain, um, uh, parts.

So they divested their fuselage maker, Spirit Aero Systems. Don't really know, uh, what, you know, what they were thinking. But yes, it, it was divested to a private equity firm, Onex, uh, in 2005. They, um, are for all intents and purposes, I don't know exactly what's changed, I know that Spirit does do [00:41:00] work for Airbus now, Boeing and Spirit are both, um, both have very similar cultures, especially, um, in, in, you know, to the South Carolina plant, but the Renton plant is similar.

there is widespread falsification of quality assurance, Um, there's widespread falsification of routine, um, maintenance, uh, documentation. There is, um, you know, there's just corner cutting happening all over the place. And that is what happens when you have a safety culture that was here, and then you have, um, you know, corporate, dictates that.

There, there's massive turnover, there are a lot of people running around who don't know what they're doing, there is woefully insufficient training, you only have to go onto their glass door, To get us an idea of what it's like at SPIRIT and it's stuff that you hear about at, uh, Boeing all the time.

a culture of nepotism and, [00:42:00] um, you know, favored good old boys and generally, you know, workers who start and, and kind of have trouble kind of keeping their head above water and lots of chaos and dysfunction and, and a complete breakdown in a lot of, um, important, um, quality assurance controls. So that, you know, that we've heard, there was a whistleblower named Ed Pearson at Boeing, um, in, in the, uh, 737 plant there.

Um, there have been many whistleblowers in South Carolina. Um, again, the, the Al Jazeera, an Al Jazeera documentary went undercover in that plant, so you can hear about that. And then at Spirit, it seems like it is the same situation. In these cases, like I said, and, and also a less understood situation is in St.

Louis where they are, they have been developing this, um, fuel re tanker. Um, it's supposed to be a stealth aerial fuel re tanker for the, um, for the Air Force, um, to [00:43:00] replace a fuel re tanker that is 65 years old or something along those lines. Um, and it is. A, an unmitigated disaster that has lasted now, like, 20 years, I think, since they started trying to, um, convert 767s into, um, fuel re tankers and, they, you know, there, there was this idea that they were going to use software to correct the, uh, deficiencies of the hardware and it, it, it still hasn't worked out and it's still, a, a, a Complete basket case, but apparently the urgency is sort of lost because it turns out we don't really need to do, aerial fuel re tanking in, um, refueling, sorry, um, in, uh, in combat missions so much anymore, um, we've sort of gone beyond that, but it's important to know that, you know, remember that Boeing's, um, military side, the, um, Starliner space capsule, um, If Elon Musk can blow [00:44:00] this company out of the water over and over again and humiliate them, you know, Boeing reminds me a lot of my football team, the Eagles, um, this, this season.

But if this season was stretched out into, you know, 25 years, um, it, it's, it's sort of like, how did they lose the ability to do this basic job completely? they used to be able to. To do this, and now it seems like they don't have any idea what they're doing. Well, it's a complicated job. Football, I'll say.

I love to watch it. I still don't totally understand it, and I will never be able to understand what it takes to put, you know, four million parts together. But, um, unlike guys like Calhoun, um, guys like McNerney, you know, unlike the, the spreadsheet dudes who are, who have been running Boeing, I know that I don't know.

I know that I would want to hire an engineer for that job, and it's very obvious, it's been obvious [00:45:00] from, you know, from the outset what the solution to this problem is. It starts at the top, but I don't know how we'll see it. Um, I, I really wish that the short sellers, like, uh, you know, you know, if, if, if there's a woke Bill Ackman out there, if they would get together and, and force this. to resign, who does not even have, he doesn't even have, I would call him an MBA, but he doesn't even have an MBA. He has an accounting degree from Virginia Tech. I don't know if that counts. You know, this is, this is a guy who really at this point deserves to be, he made some murderous decisions, um, after the, um, the 2018, uh, Lion Air crash.

He ins Ins Ins He continued to blame foreign pilots for the MAX crashes years and years and years after it was conclusively proven that those pilots did their job and an impeccable job. And by the way, they died. he's a [00:46:00] scumbag. And, oh, by the way, He doesn't come to work. He works, he, I think he works, uh, from Maine.

Um, he, you know, he works from one of his many houses. Um, he recently tried to get, uh, get, you know, employees back to work and, and, and this work from home thing. But nobody believes that Calhoun, you know, works from home. from anywhere but his, you know, jet or his, his vacation homes. you know, they moved the, this, you know, predates Calhoun, but they, they used to have a headquarters in Boeing, uh, in Seattle by the, um, you know, the assembly plants.

They moved it to Chicago, then they moved it to Virginia. They've moved headquarters of various, um, uh, asset parts of the business so many times to the point that they basically don't have a headquarters anymore. And that's another problem, is that you can't put together four million parts, over Zoom. Doesn't work.

David Sirota: you couldn't, I couldn't state it better myself. You can't be a, a placeless company and [00:47:00] also, uh, be building, or assuredly be building, such complex machines. So I think that gets to the question that's probably on everyone who's listening's mind. Uh, and I'm going to throw it to both of you.

Uh, we'll start with Bill. The question of should passengers be scared? When they get on a plane, and I want to, I want to just summarize what we've learned from this discussion. So Boeing has a history of not telling the truth. Uh, it has a history, it and its subcontractors, has a history of ignoring workers.

And whistleblowers. The FAA is underfunded to the point where it can't do an adequate level of inspections. Congress doesn't really seem to care even a little bit and can't really seem to get anything, done. Although it's, I guess it's done a couple of, a couple of things in recent years. But it's not seriously, it doesn't seem to be seriously on the case [00:48:00] in the way, uh, these, uh, problems should require.

And yet. The United States commercial airline system does have an exemplary record of a lack of crashes. I forget how long it's been since there's been a crash of a U. S. airliner, but it's been a long time. So there are these two, there are these two competing Sets of information, right? What we know about Boeing, what we know about federal oversight, what we know about workers being ignored, whistleblowers being ignored, but also what we know about the crash record or the lack of crashes in the record.

So Bill, all with all of that is context. Should passengers be scared when they get on a plane?

Bill McGee: When I was, um, researching my book, I spoke to dozens and dozens of safety experts. And when you put a question like yours [00:49:00] to them, what they will say is, there are different ways of measuring safety. Because the industry, and Congress, and the FAA, and many others, will immediately say, look at the accident record.

It's the best it's been ever. And there's no question about that. And knock on wood, let's hope it continues. But true experts will tell you that's just one measurement, right? As one FAA inspector said to me, you know, the day before, you know, that oil rig blew up in the Gulf of Mexico was 100 percent safety record, right?

But yet there were signs, there were whistleblowers, people saying something's wrong here. So when you ignore whistleblowers, not once, not twice, but just systemically, as a way of doing business, these people on the front lines that know something's wrong, whether it's at Spirit, whether it's at Boeing, whether it's at the airlines, whether it's at the outside repair stations.

Whether it's within the FAA itself, I mean, I've spoken to quite a few FAA whistleblowers from frontline inspectors, people that kick the tires, as they say. That is another way of measuring safety. I fly all the time. I'm going to be flying this [00:50:00] weekend. I was just looking last night at my itinerary. There are four legs.

One of the legs is going to be on a MAX. not a MAX 9, And, you know, would I stop flying? No. Would I tell my loved ones to stop flying? No. But that doesn't mean I don't have grave concerns, and that doesn't mean I don't think that we just keep, you know, rolling the dice and hoping for the best. The fact is, much, much of that safety record is built on improved technology.

Airplanes are built better. We have, look what happened, you know, it's gotten lost in this because of what happened in Seattle, but look what happened just nine days ago in Tokyo. Where all of those people got off an Airbus A350 when it was, um, when it was in flames. the fact is that a lot of the technology has been, has, has gone into making, first of all, avoiding accidents, but also allowing airplanes to, Not be consumed by smoke and fire immediately so that you can get off the damn thing, okay?

Those improvements have saved lives. It [00:51:00] used to be, you know, it was like the old joke about the operation was a success but the patient died. It used to be that there were many cases where dozens of people would survive an airplane accident and then die of smoke inhalation because they couldn't get out in time because all of the materials on board were flammable, you know.

So there have been all these improvements over the years. But then when you look at the basics, when you look at the engineering like Mo's been talking about, When you look at the basics of allowing engineers to do what they do, and they're ignored, or they're pooh poohed, or whatever, you know, That is just a bad recipe.

I mean, the bottom line is we have to decide as a nation. Look, if the White House doesn't send a budget to Congress saying we need X amount of dollars more for the FAA, it's unlikely Congress is going to say, by the way, here's some extra money. Here, take it, right? So again, as I said, go back seven, eight president, eight administrations, and you can see.

We have not prioritized it as a country. But yet when something bad goes wrong, you know, we're back to that tombstone mentality. Suddenly, it's front page news and everybody's screaming about it. Well, we need to listen to the whistleblowers before the accidents, before, you know, we [00:52:00] get to the tombstone stage.

in answer to your question, I have grave concerns about the degradation of oversight and, uh, you know, the, and the FAA's role in all of this. But, um, you know, thankfully, uh, the accident record is good, but that is not the only measurement.

David Sirota: Moe, I'll ask you, I'll give you the final word on it and let me just add one thing to the question of should passengers be afraid when they get on planes? there is an argument that For all of the things that we've documented about Boeing and its subcontractors and concerns about them, very legitimate, terrifying concerns.

Uh, also, uh, deplorable, uh, uh, dissembling, uh, by some of these companies. There is an argument to be made that look, ultimately, at the end of the day, a company like Boeing, its interests are aligned with the safety interests of the passengers in the, in this way, it [00:53:00] doesn't help Boeing if all of, all of a sudden, its planes are falling out of the sky.

So I guess the question from that is. Not only should passengers, should they feel safe, should they be scared when they get on planes, but should we presume that something like the Alaska Airlines situation will create enough pressure or enough incentives for Boeing to quickly fix what it can, or is the situation unfixable?

Moe Tkacik: so, just, yeah, to start with that question, I guess, um, The MAX crashes killed 400, 397 people, something along those lines. I'm, I'm, um, forgetting. You know, those were harrowing, um, you know, 20 billion, 30 billion dollar disasters for Boeing. The stock is still down almost half, um, from its peak, after the first [00:54:00] crash.

Um, and, So I would say that, you know, it's a little too easy to say, oh, the problem is a shareholder, just the single minded focus on shareholder value. Well, Truth be told, if they were singly focused on shareholder value, then, you know, then we wouldn't be in the same woeful situation. There would be, Boeing would have invested in, you know, its production capacity.

Well, Boeing would have, There's an increasing problem in corporate America where, costs, you know, the, the, the consequences of, um, awful mismanagement, murderous mismanagement, don't exist anymore, um, are very easy to shirk, um, very easy to, you know, uh, to, to, it's, it, you can, you know, spin off the, the, the bad [00:55:00] seed, the, the shit co and, and, and have that, uh, file for bankruptcy and then, you know, get the bankruptcy judge to give you a release from, um, you know, for, for, from liability for wrongdoing, you know, there's all kinds of ways that corporations can shirk, um, liability.

Yeah. And, the way that compensation packages are calculated really, you know, don't reward. They're, they're basically heads I win, tails I, I win a little more. So, there is, this is a problem where we sort of just have this kleptocracy. And when I stand on a plane, when I get on a plane, yes, if it's an Airbus, I feel a little bit safer.

but. I also know that this mindset that the people who, you know, that the 737 is an old plane. Boeing was a company that was populated at one time by, you know, some of the, the most ambitious, and [00:56:00] diligent thinkers, um, you know, in, in the country. Some of the most, the most impressive minds and, um, the most ambitious intellects and, um, the most.

Collaborative, among those ambitious minds, um, and intellects, they were really committed to learning from their mistakes. They were really committed to empowering everyone along the supply chain to speak up if they thought that something was going wrong. Um, that is, is, uh, you know, credited to Toyota now that, that, that mindset, but it was, um, you know, pioneered at Boeing.

And, so you're You're still dealing with the these machines that were designed by really smart guys you know, it's it's And And so my fear is more like this business model when I when I go to a hospital Right, like that's where what you'll probably die. You're much more likely to die from hospital, you know acquired infection Because of the same [00:57:00] business model, um, in, in, in, so, yeah, I mean, you might be, you, you're a little safer, uh, flying than, than you are doing a lot of things, even still, but the, that, that doesn't, that doesn't make me feel any more secure, It is, it's so, the thing is that it's just been so obvious to everybody paying attention, um, that there's this real disease at this company, um, and this company, you know, means a lot to a lot of people in terms of it's still the biggest exporter, um, it has this unbelievable legacy when the Apollo 1, um, uh, you know, was a disaster and killed, um, Three or five astronauts, Boeing took the reins of the program and, and, and turned it around. Um, I would like to, there to be an institution in this country that I could trust a fraction as much as, as, um, as, as [00:58:00] you could trust Boeing in, in the sixties and seventies. But, um, I, I can't think of one.

Um, I don't think that the fact that nobody's died in an American, um, airliner incident in a while, um, that doesn't give me any comfort.

I think it's just completely, you know, it's, it's luck. You know, the Eagles won, you know, we're 10 1, uh, a month and a half ago. They're, like,

widely considered the

worst team in the NFL.

David Sirota: Yeah, and look, I

think there's something to be said for the fact, even if there haven't been, uh, deaths in a, in a while in American aviation, it doesn't excuse the glaring situation that's right in front of our face. It doesn't excuse, uh, not doing what's, what can be done, what should be done, what we know.

Must be done to make things as safe as possible. I want to thank both of you. Bill McGee is a senior fellow for aviation and travel [00:59:00] at the American Economic Liberties Project. He's also the author of the airline industry expose, Attention All Passengers. Mo Takasek is an investigative journalist and an editor at the American Prospect, who has done amazing reporting on Boeing.

Thanks to both of you for being here.

Bill McGee: Thank you.

Moe Tkacik: Thank you, David. Always a pleasure.

That's it for today's show. As a reminder, our paid subscribers who get Lever Time Premium, you get to hear our bonus episodes. To listen to Lever Time Premium, just head over to levernews. com to become a supporting subscriber. When you do, you get access to all of Lever's premium content, including our weekly newsletters and our live events. And that's all for just 8 a month or 70 for the year. One last favor. Please be sure to like, subscribe, and write a review for Lever Time on your favorite podcast app.

David Sirota: The app you are listening to right now, take 10 seconds and give us a positive review in that app. And make sure to check out all of the incredible reporting our team has been doing over at [01:00:00] levernews. com. Until next time, I'm David Sirota. Rock the boat.

The Lever Time Podcast is a production of the Lever and the Lever Podcast Network. It's hosted by me, David Sirota. Our producer is Frank Capello with help from Lever producer, Jared Jacang Mayor.