A breakdown of US-China defense links "really dangerous"

---

Chad Sbragia was the first US deputy assistant secretary of defence for China set up during Donald Trump’s administration. He held policy research leadership roles in the US Marine Corps and Indo-Pacific Command and is a research analyst at the Institute for Defence Analyses, a Virginia-based think tank. He spoke to the Post on the sidelines of the Xiangshan defence forum in Beijing. This interview first appeared in SCMP Plus.

How would you evaluate the progress of the resumption of US-China defense contacts and exchanges so far?

The re-establishment of defense contacts and exchanges, I do think is important. They were on a good footing, [with] a good plan in place and how that fell off the cliff early in the Biden administration was really kind of remarkable. It takes away opportunities to correct the record, to communicate clearly. It takes away opportunities to perhaps find some common ground in areas of cooperation.

We have several hundred US service members that are still missing someplace in China, [a reference to troops killed in the second world war] and that was an area of cooperation that lasted for a long period of time. That’s an area of cooperation that’s now two years behind for no reason.

Now that they’ve restarted [defence contacts], the way I would characterise it, is the defence relationship has partially restarted.

Neither defence establishment restarted any of the senior dialogues. The most senior dialogue they restarted was the deputy assistant secretary-level dialogue, the defence policy coordination talks. But the other higher level dialogues, at the assistant secretary level or the undersecretary level or higher, none of those were restarted. That’s an anomaly in a relationship, and it’s also confusing about why.

I think that’s a great deal of risk when you have no mechanism to resolve larger strategic policy disagreements in place. It raises questions: does either side expect to resolve large policy disagreements? Or is there no interest on either side in resolving those disagreements?

There are a lot of questions that bring out about what was restored, and why things were not restored. It’s good the [defence] secretary [Lloyd Austin] set up a call.

I don’t know who his counterparts are now. [Chinese Defence Minister] Dong Jun is not even on the CMC [Central Military Commission] so technically, the secretary has several counterparts, but Dong Jun isn’t one of them now. So that’s going to be a problem.

With the theatre command talks resuming recently, how would you compare the effectiveness of command-level exchanges between now and the time when you were in service?

The types of questions that they could or should work on now are a little bit harder. [It] looks like they were kind of just passing talking points, which is not bad. You need to hear where they’re at at any given moment, changes of lexicon. Those things are important.

You need to have the opportunity to very clearly articulate and communicate what the US position is. But ideally you’re also having an opportunity to deepen your understanding of the other side, not just what their talking points are, but to see and to get a feel for what it looks like.

What’s their readiness state, what’s their professionalism like? What’s their political control and authority? What’s their discipline over their forces at a strategic, operational, tactical level? I want to see their equipment, right? Is it a threat or not? Do they know how to fly things or drive things or sail things? Those things are all manifestations of confidence for the measures that really do matter.

The Indo-Pacific commander hadn’t talked to any counterparts in China for quite a while. I remember back in the 2000s that the Indo-Pacific commander would come to China multiple times a year, three, sometimes four times a year, and talk to very senior leaders.

Having these visits helps reduce security dilemma anxiety. When they come to visit, I’m going to poke my nose around, I’m going to look around, I’m going to assess, and I’m going to understand you better. And you’re gonna do the same thing and I’m gonna try to be pretty transparent with you. I’m certainly gonna be frank and honest with you, because the jobs of both sides are to avert conflict, not to generate conflict. So the way we did that was by talking to each other and visiting.

Do you see these visits resuming any time soon?

It’s a different time, and the dynamics have changed. [We’re] not going to go back to that.

But I think on the Chinese side, they started to downplay their desire to talk to him, because the Indo-Pacific commander is a war-fighting commander. He’s an obstacle. It’s much easier to go back to Washington DC and talk to folks who were more receptive to the Chinese than the Indo-Pacific commander. He’s the principal kind of warfighter that they would confront.

But in that light, I think that’s why both sides actually need to be talking at that level. He’s not just a theatre commander. He’s bigger than that. He’s responsible for half the planet. He has more strategic span of capacity than the entire PLA [People’s Liberation Army] has. So he has a role in having a relationship, and traditionally has had with military region commanders and now theatre commanders.

The Indo-Pacific commander also has to have a point of contact that he can have as an interlocutor in Beijing on the senior staff here, ideally with the Joint Staff Department, and he needs to maintain both of those.

The United States is having its election very soon. If Donald Trump wins, do you think the resumption of the military dialogue will be reversed?

I think in the US, they often say that personnel is policy, meaning what personnel you bring on is often a reflection of what policies are enacted. That’s the case of any administration. Who he brings on in key billets will probably be a better determinant of the restoration or the expansion of current defence relations with China.

One thing that I think, at least for a Trump administration, is that I think he’s got a track record that he does not fear to talk to anybody. He talked to Kim Jong-un. Nobody in the past would do that. People would always say that’s crazy. So I don’t think instinctually that Donald Trump would say that talking between the two militaries or the two defence establishments is a bad thing. I think he’s just the opposite. In fact, he’s eager to prove that the United States shouldn’t be and isn’t scared of talking to anybody.

During 2018, 2019, 2020, beginning of 2021, the defence relationship had extremely robust and constant communications with each other through multiple pathways from the secretary level down, and it hadn’t been like that for a decade.

So we really emphasised that a lot, and the PLA side was very receptive to that. I talked to my counterpart constantly. I talked to their representative in Washington constantly. Our embassy folks here were constantly talking to their counterparts, feeding that back in kind of a big loop as it’s supposed to. There were more backchannel communication paths to more non-official sources that were occurring. It was heavy, and often.

During those years, the Chinese side actually initiated calls to what we call the DTL, the defence telephone. The Chinese senior leaders had never initiated a call to the United States since the DTL was started in 2008. The US was always the one asking for the call, and finally they started asking, but I think that’s a reflection of that there was value to calls. And they weren’t always pleasant, but they were extremely frank and actually very productive calls to include during Covid periods.

Would there be statements and reports about the calls every time?

Not always. But the Chinese are usually pretty good about doing [this]. A good case in point is the whole, you’ve probably heard about the issue, like the October surprise issue. That was a good case of [when] we saw the Chinese had a misperception [about a possible drone attack on Chinese-held islands in the South China Sea ahead of the 2020 presidential election].

It was a gross misperception, gross miscalculation. And Secretary [Mark] Esper directed calls to PLA counterparts on his behalf. And the [defence] department did. We explained to the Chinese that there is what we saw as a bad miscalculation. They accepted it. They reflected it in their media the next day.

At the end of the administration, when I talked to my counterpart, he said [Central Military Commission] chairman Xi [Jinping] had accepted that and paused military escalation because of those calls. That’s a great example of how having steady, routinised forms of communication can really avert a crisis that might emerge otherwise. Perfect example.

Now with less direct communication between the two militaries, is the US facing more routinizeddifficulties in understanding the PLA, such as the anti-corruption saga? What is the US assessment of Beijing’s anti-corruption efforts on its Rocket Force?

I don’t know what the cumulative US government assessment is.

But this is what is a little bit confusing to me: how much anxiety and concern China continues to have, and the utter lack of desire to have a defence relationship of any substance. [And that] is a little bit unnerving to me. You feel like you don’t need a defence relationship if you don’t think that there’s anything that’s solvable from having one.

That’s really dangerous, particularly if they don’t understand how quickly poor assumptions or assessments might arise if you don’t have conversations with each other. So that’s a big concern of mine.

Certainly for the United States, there’s a lot going on in China that is increasingly opaque, not increasingly transparent. And one of them is that, what is going on with the senior political military leadership? It is not clear to me, and I do not fully understand the changes. Those changes have not been articulated very well from China. Why is Dong Jun not on the CMC? Can you explain that to us? Why is he not a state councillor? Are you changing? Is that a new pattern? Who’s the manager of the international portfolio now within the PLA? Who would be our interlocutor if there was a crisis that you would pick? I mean, there are a thousand questions.

Could the US find out more about these questions in the past trips?

Yeah, you could at least ask. I’ve always found that if you ask them questions, the Chinese are very frank and open. They must be appropriate questions, not questions that won’t or can’t be answered. How many bombers are going to strike me on day one? – neither side can answer that question.

But can you explain to me, do you have political control in the military? That’s a legitimate question. Do you have confidence? Because that tells me a lot. Are you fully in control of them? Are they doing what you want? They don’t seem to be doing what Xi Jinping is directing them to do. They are acting still with a tremendous amount of corruption, not following orders, and not showing that they’re ensuring discipline in new recruits, in units, and in organisations below them. I mean, that’s frankly unnerving. That’s terrifying.

We’re talking about rocket forces, right? Rocket forces control nuclear weapons. Those forces? Reports of corruption are a bit concerning. No answers on anything? Catastrophic failures and oversight of equipment development? We’re not talking about small things. It’s about long-range missile systems, missile systems that are being tested and going haywire in China. They shoot missiles over Taiwan at times, if they fall short … I mean, there are a thousand reasons that you know, you start to manifest mistrust.

Defence departments do one thing, they plan to defend the national interests of the political leadership, and they’re always going to look at what’s the worst plausible case that could happen. And if you’re not transparent and open and explain those things, it’s the obligation of the other side to plan for the worst case. I think that’s what’s, in part, what we’re looking at.

Have you observed a stepping up of military and defence engagement by China with Indo-Pacific countries, especially the Association of Southeast Asian Nations (Asean) states?

Last year at Xiangshan, Zhang Youxia [CMC vice-chairman] talked about the need to improve military diplomacy and increase its activity with other nations. He prioritised the EU nations, but I think it certainly applies also to the Asean nations. Have you seen that more over the last year? I think that’s true.

How is Washington reacting to this?

I don’t think that there’s much that is not already public. You know, increased investment, greater collaboration. Certainly, there’s been a pretty significant uptake of bringing powers that reside outside the region, or only incidentally out, inside the region. More in, right?

So, Germans, Canadians, French, the UK coming in, sending warships through, doing more, participating in more multilateral events, even on the ground [with] greater collaboration by partners and allies within the region itself, and more kind of fulsome exercises, real exercises, certainly the US and Japan, certainly the United States and Australia. Aukus is a good example. Yeah, it’s intensifying.

And for China-Russia, do you find their stepping up of joint drills alarming?

My personal opinion is it’s not that big a deal at this point. It’s a big deal in the United States, there’s always this concern that they’re going to partner up. I mean, I think the Chinese and the Russians dislike each other quite a bit.

In fact, one of the reasons that they work so hard on their relationship is to ensure that their relationship doesn’t fall apart. It turns out, certainly, the most important contribution to the relationship is the mutual hatred of the United States. They’re very aligned in what their preferred world view is, and they have a common competitor, a common enemy, which is the United States.

China, Russian military collaboration is pretty minimal, more symbolic strategically, less important, tactically or operationally. They’re just really operating next to each other. They’re really not doing a lot of combined command stuff, [but] a little bit of ballistic missile defence, some of these long-range air patrols or maritime excursions. That’s interesting. They are flying next to each other but not really doing major air combat practice.

In June, Admiral [Samuel] Paparo introduced the hellscape plan. [The head of the Indo-Pacific Command had said the US military planned to create an “unmanned hellscape” in the event of a PLA attack on Taiwan.]

It aims to use a variety of drones to buy time for the US military in Taiwan. Given that China is the biggest producer of drones in the world, while the plan would involve a lot of low-cost drones, do you think it’s a feasible plan?

You know, he didn’t provide enough fidelity for the PLA to assess the veracity of that concept, but it’s very clear that that’s the trajectory of where everything’s going. The PLA writes constantly about different versions of networked and autonomous weapon systems, including drones of all sorts: air, space, sea, surface, subsurface and even deep sea, so that’s a different aspect.

And that’s where everything is going. Stuff that can be launched from the shoreline, from deep inland, from a boat, from a submarine, from an aircraft … There are not just drones, but all autonomous weapons systems that are going to be coming from every part of every domain.

I mean, it’s incredible, and that’s just the trajectory. So as a hellscape, it hasn’t manifested as a specific detailed plan backed up by capabilities. It’s a conceptual intent, but as such, it’s common, right, from the Chinese side too.

Many of the PLA drills around Taiwan are believed to be practising some sort of naval blockade. Do you think it’s probably a way for the PLA to use a naval blockade in the event that it really needs to resort to armed reunification?

Is a naval blockade a plausible option? I don’t think it’s as plausible as a lot of other experts do, because I think there’s a lot of significant strategic downside to that. It’s certainly plausible. And even an invasion campaign kind of starts off with a blockade function. So you’re always going to do a blockade. It’s just whether you add an invasion. So that’s good for the Chinese flexibility.

But it’s ugly; a blockade is a bad strategic condition. I don’t think China would choose that for a variety of reasons, but maybe there are reasons why. They will determine what their priorities and options are.

What would be the reason they would opt for it?

One of the reasons you choose blockade, as opposed to an invasion, is always, in the end, you can say, I’m done with the blockade, and de-escalate. I’ve taught a lesson. I can go home, and I can at least characterise it as not being a loss.

It doesn’t invest you totally or cement you into a permanent course of action. If you try an invasion and it fails, you can’t hide that you failed if you didn’t take it. That’s not the end either but if it’s a blockade, say “OK if this works, it’s great”.

If it doesn’t manifest quickly enough or the United States comes too fast – if they come or the Taiwanese hold out, or somebody else comes, I mean – it does give the political leadership a way to say “I’m not going to jump all the way into the pool, but I’m getting in halfway. If I need to, I’ll go even further but I can get out and still have my hair dry.”

As a last question, as this is the third time you’ve attended the Xiangshan Forum in Beijing, do you think face-to-face events and visits are helpful for people to better understand China, as people from China and the US are having less interaction than in previous years?

Absolutely, there is something you could interact and see first hand. It develops a lasting influence and that’s good.

There’s a risk sometimes of people taking the anecdotal pieces that they see from visiting or even living here, and not contextualising it within a broader evidentiary base.

Here is the analogy that I use back in the United States. Nasa needs astronauts who’ve been up in space. They know what weightlessness feels like, they’ve run across the moon and bounced on it … But you can’t run Nasa just off of the astronauts. You need astronomers who are deeply studied in astrophysics and orbital dynamics and geometry. Those people are really important.

Ideally you have somebody who can do both, spend some time in China but also study China independently and don’t let their time in China shape entirely their understanding of China.

The United States used to have this cadre of younger people [and] they’re really good, solid folks. They’re astronauts and astronomers; now that’s all you get: astronomers. They’ve looked at it from afar, not up close, and are not as experienced. The same applies to the PRC side.

I was stunned last year when I came here. I sat and talked with some Chinese officials and some of the think tanks, who are famous folks here, and they discussed their perception of the United States, United States policy or activities. And I was stunned [by] how just completely wrong they were. These are people who are America watchers, people supposedly the experts in China to watch the United States and feed that into leadership decision making. They just had some horrible assumptions or assessments.

The point being is when you don’t have those times to interact, one of the manifestations of that is that people could start to form poor assumptions, and those flawed assessments feed on each other … There’s a great danger in that. So once folks for both sides come together, even if they don’t like to talk to each other, one of the things it does is [that] it makes both sides confront their assumption that may be wrong, and they have to question them, at least they have to defend them.

I am here in Europe. To stay away with the constant lockdowns in Shanghai and better connect with the world, I scheduled three months working as a digital nomad and in the meantime visiting friends in this beautiful continent. 

My trip had gone perfectly smooth until the moment when Austrian Airlines lost my luggage at Vienna Airport. It was the night of July 30. When I landed at London Heathrow Airport at 10:30pm, waited nearly an hour at the baggage carousel only to realize that my luggage was not going to come out.

It was a panic and unnerving moment. It was also too late to regret that I had packed nearly everything in it.  My phone battery at the time was running out and I put the charger in the luggage. I wanted to cry for help. I needed the phone working for google map and getting a Uber!

Thanks to a back-up battery serendipitously found in my pocket, I survived the night. When I reached my accommodation place, it was about 3am on July 31. 

Then a few days passed without hearing anything from Austrian Airlines. It seemed nothing had happened. "How am I going to live my life in London without my things"? I constantly asked myself. I only had two T-shirts and one pair of shoes. I phoned almost daily but could not receive a valid reply about the whereabouts of my luggage. I was getting angry. Through a friend's recommendation, I joined a Facebook group titled "People who want a class action lawsuit against Austrian for lost luggage". From there I began to hear about disturbing stories of other people missing their luggage. Many had situations much worse than my own. For instance, a family of four, parents and their young children lost all five bags and their vacation turned upside down. A photographer could not locate his luggage in which contained all his shooting equipment purchased by his hard-earned money. Someone flying from Newark lost his bag twice by the same airline. A passenger joining a wedding event had to purchase pricy replacements because her gowns were in the luggage. Everyone in the group was upset and angry, not only for Austrian Airlines losing their bags but also for no whatever communication from them. While people sharing experiences, they were also anxiously seeking information about whom to call, at what numbers, and anything about financial compensation. Some of them even thought about flying back to Vienna Airport for the sheer purpose of searching on their own.   

Many frustrated customers wrote emails directly to Austrian Airlines CEO but only ironically found out she was on "summer vacation". "What a joke!" A customer wrote: "I am sure she is not flying her own airlines". 

As people had nowhere to seek help, they poured onto Austrian Airlines social media accounts. Whenever the airlines posted something to market themselves, people wrote comments about their missing luggage and vented emotions. It was a messy situation. On day 19 of my missing luggage, people received an email from the airlines Chief Commercial Officer. While he apologized, he also offered "explanation". Here is what he says:

We not only want to apologise, but also explain to you why there are such unusual delays: There are currently massive logistical and staff constraints worldwide, which are delaying baggage handling in particular. As you can certainly imagine, the world of flying is highly interconnected. Unfortunately, we are dependent on our global partners and thus confronted with numerous problems. 

My luggage went missing in between two of their own connecting flights. It did not concern "worldwide" constraints and "global partners". 

Let's face it. This problem is more acute with Austrian and Lufthansa Airlines. If he wanted to expand further, it would be airlines of Star Alliance. How convenient to complain the worldwide shortages and global partners.    

That comes to the ultimate question. When aviation misbehaves and mistreats passengers, who is responsible? I've seen this airline unwilling to taking responsibility. While Vienna Airport was flooded with delayed baggage, the airlines were still selling tickets and scheduling high volumes of flights. As a result, newly missed bags join the queue everyday and more and more bags were piling up. 

Can anyone in aviation raise their hands and say "we are responsible for this"? After two crashes of 737 MAX, the then-Boeing CEO could say "we own it". In this baggage debacle, can anyone do it? What about constituencies such as IATA, regulatory authorities and airline alliances? Are they willing to do something? What about airports? What are their roles in this? Should all these entities stand up altogether and be willing to take responsibility for not treating travelers and their properties with respect? 

At the time when this article was published, some people in the Facebook group had re-united with their luggage. They were mad with joy. Mine finally arrived after 21 days missing. Many are still awaiting. Austrian Airlines have no clear policy published on the website about how to compensate passengers for missing or delayed baggage. I requested a full refund for my purchased items but keep my expectations low about receiving a refund at all. Regardless of the outcome, I hope Austrian airlines to learn a lesson from it and its senior management extrudes higher levels of professionalism to its customers.    

We received a series of video clips showing residents in Songjiang District breaking outside their homes and clashing with medics and lockdown volunteers, collectively chanting "distribute supplies, distribute supplies" (发物资). In another video a woman was shown shouting "we demand supplies! We don't want to starve to death!"

There are also other video clips adapted from Chinese films circling wechat groups which are direct innuendos of the current situation. All points fingers at the central leadership about their decisions and policies having caused people's mishaps and social chaos. 

Two good news for the aviation industry came out this week. On Monday morning of November 9th, the American companies Pfizer and BioNtech announced their vaccine BNT162b2 had proved 90% effective in its Phase 3 trial. This is such an uplifting news for humanity. It marks the beginning of the end for the covid-19 pandemic. Later on the same day, another news broke out that FAA could end Boeing 737 MAX grounding on November 18th, only a few days to go from now on. The possible lift of the ban coupled with the vaccine news will mark a new era for Boeing and the aviation industry. People will come out to fly. Boeing is poised to be on a trajectory of recovery. World travel will resume. People’s lives will go back to normal. Though the final normalcy will take time to happen, the vaccine news will change the psychology of people. Despite the continuing surges in COVID-19 cases in the West, the world will begin to look at the pandemic differently. COVID-19 now is a curable disease that will only take some time to perish.

Writing and commentating on Aviation is a solitary affair. The community is small and the circle is self-enclosing. In China, there is also a lack of expertise. Most articles you read are translation from Western media which, many times serve an agenda rather than being objective, not to mention in-depth. In the West freedom of press has its own twists. Many times information is fed but authenticity is not guaranteed. Whatever articles you read, keep discretion as your best friend. 

Since last time I wrote about the Ethiopian Airlines flight 302 crash, much has unveiled. The initial investigation report was released in early April. Quote the words of an American pilot Juan Browne who has a 40-year career flying commercial jets: “it is sad as they almost made it”. 

Then what caused the plane not making it? (Here I am providing a simplified version for general public.)

Short after the Indonesian Lion Air crash, the American FAA issued an Emergency Airworthy Directive providing procedures on the Runaway Stabilizer Trim caused by the MCAS malfunction. You don’t have to memorize these terms just to understand it’s a procedure that tells pilots what to do when such an MCAS anomaly occurs. The Ethiopia crash has two primary reasons which the pilot did not do quite correctly according to the procedure. 

First, the auto-throttle was not disengaged during the entire flight. This means the speed of the aircraft was pre-set and never reduced by the pilots even though the aircraft was experiencing uncommanded nose-downs. The plane, tragically was thrusting itself to the ground at 500 miles per hour.

Second is that the pilots changed the trim position from CUT OFF to ON at the end of flight. The FAA procedure stipulates that the trim remain “CUT OFF” in such an emergency. Because of the speed the jet was cruising, it was so difficult for the pilots to manually take over the aircraft when they switched ON the trim. Once they let go the little button on the trim yoke, MCAS reactivated and put the aircraft into a nose-dive position. 

Reading the preliminary report and listening to pilots explaining and illustrating the situation is nerve-racking.

At this moment, you may say “okay, it is the pilot errors that caused the crash”. In fact, you cannot say that and you should not. It ought to go back to the manufacturer and tell them that it was your design that put the pilots in such a precarious situation in the first place. By saying it, the subject of MCAS has to be re-mentioned.  

MCAS is there to prevent a stall. It is a back-up system supposed to work in the shadow. It must be there as the MAX has a bigger engine than the 737NG. What triggers MCAS to function is the AOA sensor located at the nose of the aircraft. In the Ethiopian case, it was preliminarily determined that the AOA sensor was damaged by an foreign object, most likely a bird. MCAS was activated due to the erroneous data AOA sensor sent. That is why Boeing defended itself and its CEO said “there was a chain of events that needs to be investigated”. Nevertheless he also reiterated: "We own it". Currently Boeing’s fixes are 1, put a redundancy system, a second AOA sensor at the aircraft. Only when data sent by the two AOA sensors simultaneously correspond and identical would MCAS be triggered; 2, MCAS would not be activated by data sent by one AOA sensor or the discrepancy between the two sensors is bigger than 5%. The link between MCAS and AOA sensor(s) would be cut off in such a case. 

Technically and logically it works. Boeing has been touring worldwide providing updates about its software upgrades. Its sole aim and wish is to get MAX back to the sky as quickly as possible. 

If things are this straightforward, you probably would not have heard all the bad news about Boeing nor the criminal investigations hanging at Department of Justice. There are many questions raised, starting from ... did Boeing know that MCAS was unsafe but put onto the aircraft nonetheless? How come they did not mention it in the flight manual and enforce training? How on earth was the flawed MCAS design certified by FAA?! To the questions such as how do they do business? What’s wrong with this company? Should its CEO resign? 

Since the two accidents, I have talked with a few pilots as well as reading and analyzing comments posted on the industry forums. Many people are experienced engineers and pilots. Very often discussions turned into heated debates. I asked one US pilot last week: “why did some pilots say it is an easy procedure to fix whereas many say it is not?” His answer was: “Those who said it was easy normally have a big ego. They want to show how experienced they are. It is not that easy. Experience helps but no one can guarantee such an emergency be averted with such a flawed design embedded in the cockpit.”  

What would be the solution? Is MCAS really needed? Can Boeing get rid of the MCAS? 

MCAS is needed for the current 737 MAX. If Boeing wants to get rid of the MCAS, they have to go back to the drawing board and start a whole new design. It takes time. It costs billions. And don’t forget MAX has already 5,000 orders. Why do they want to do it? Can they afford doing it? At the moment, Boeing is not slightly contemplating doing it. 

This is where the situation stands today. Manufacturer wants to fix the software and pushes for ungrounding. Pilots and their unions are expressing concerns and acting cautiously. FAA is treading carefully. There is no time table for the 737 MAX back in the air. 

Which brings enormous pressure to Boeing. Think about the situation where you have pocketed 5,000 orders. With no one taking delivery, no one flying, you still have to produce 42 such aircraft every month, pay your suppliers but no cash flows in from customers. In addition you have to carefully act within the legal frame as lawsuits are mounting. 

Don’t ever forget the stock price. The modern American business fears more about shareholders dumping their shares than customers switching to competitors. On May 21, the Wall Street Journal published an article and mainstream media in the US quoted “Boeing Crash May Have Been Caused by Bird Strike”. Immediately market reacted to that headline and Boeing stock price jumped 3.5% pre-market (it ended up increasing 1.7% on that trading day). The online forums I participated in suddenly changed the technical debates into sarcasm and ridicule. Read some of the posts:

It's not easy to build a huge multi-engine aircraft that can be crashed by a pigeon, but they did it! They're quite proud of themselves.

……

Poor birds!

……

Short BIRDS!!!!! BULLISH BA!!! (BA is Boeing’s stock ticker)

In our last week’s meeting with China’s aviation authority – CAAC in Shanghai, I talked with two leaders who are seasoned pilots previously with China Eastern Airlines. One was specialized in flying Boeing jets. He told me that China had taken serious measures after the Indonesian Lion Air crash and shared the “best practices” among its pilots in such a Runaway Stabilizer Trim situation. He was quite proud and said: that is why we did not have such a problem. On the other hand he was not hiding his anger. “Boeing made a big mistake.” He stated. 

If you ever made a mistake, the best way to move forward is to admit it and correct it. Make sure it will not happen again. In this case, it is not as easy as it sounds. Admitting it is tantamount to say “I am guilty” which implies not only the financial remedies you have to pay to the victims and customers but also ensues conclusion of the two criminal investigations. Not admitting it? Think about the blemishes to your reputation and credibility. They may last for years and decades if people ever forget.  

In China things have turned more intertwined as the grounding came at a time of trade war. Right after the American President Donald Trump announced his crackdown on Huawei, all major Chinese airlines claimed financial compensation from Boeing. China was the first country in the world that announced the 737 MAX grounding. Its resolute reaction proves to be prudent and right. When Boeing wants its plane back in the air, China is the foremost nation they need to rectify and receive a green light from. What’s going to happen? Quote the CAAC leader, “grounding is easy but ungrounding is not going to be easy”. 

May 2019