Emirates president Tim Clark urged Boeing to put manufacturing quality before profits. Chris Whiteoak / The National
Emirates president Tim Clark urged Boeing to put manufacturing quality before profits. Chris Whiteoak / The National
Emirates president Tim Clark urged Boeing to put manufacturing quality before profits. Chris Whiteoak / The National
Emirates president Tim Clark urged Boeing to put manufacturing quality before profits. Chris Whiteoak / The National

Boeing in 'last chance saloon' following latest safety issues, warns Emirates head


Neil Halligan
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Emirates airline will send its own engineers to observe the production process of Boeing's 777 aircraft and fuselage supplier Spirit AeroSystems following the latest safety issues.

The Dubai airline's president Tim Clark said on Monday that Boeing has let its production standards slip.

The aircraft maker was in the “last chance saloon”, Mr Clark said in an interview with the Financial Times.

“They have got to instil this safety culture which is second to none. They've got to get their manufacturing processes under review so there are no corners cut etc,” he said.

“I'm sure [chief executive] Dave Calhoun and [commercial head] Stan Deal are on that … this is the last chance saloon.”

He said the airline will, for the first time, send its own engineers to observe the production process of the 777 at Boeing and its supplier Spirit AeroSystems.

Emirates told The National it had nothing to add to what Mr Clark said in the interview.

The Dubai carrier is one of Boeing's largest customers. In November, it placed an order for 95 additional Boeing 777X jets and Boeing 787 Dreamliners, valued at $52 billion at list prices.

The airline's 777X deliveries – now totalling 205 aircraft – have been delayed for five years due to plane certification and engine issues.

Deliveries of the first 777X-9 aircraft are expected to start in 2025, while handovers of the 777X-8 will begin in 2030.

The delivery delays have led Emirates to refurbish its Airbus A380s and existing Boeing 777s to extend the life of the aircraft.

Soaring problems

Mr Clark's comments come after Boeing reported another problem regarding mis-drilled holes on some fuselages of its 737 jets that might further delay deliveries of about 50 aircraft.

The 737 programme is already under scrutiny from regulators after a door plug on a Boeing 737 Max 9 jet blew off on an Alaska Airlines flight in January, shortly after take-off.

That flight, with 177 people on board, made an emergency landing at Portland International Airport in Oregon.

The General Civil Aviation Authority said no UAE airline operating the Boeing 737 Max 9 aircraft was affected by the technical malfunction.

Shares at Boeing have declined 17 per cent this year.

In an update posted on Sunday, Stan Deal, president and chief executive of Boeing Commercial Airplanes – the division of Boeing that designs, assembles and sells airliners – said one of its suppliers notified the company about “two holes may not have been drilled exactly to our requirements”.

“While this potential condition is not an immediate flight safety issue and all 737s can continue operating safely, we currently believe we will have to perform rework on about 50 undelivered airplanes,” Mr Deal said in the statement on Boeing's website.

“While this issue could delay some near-term 737 deliveries, this is the only course of action given our commitment to deliver perfect airplanes every time.”

The FAA grounded 171 Max 9s after the Alaska Airlines incident and said it was investigating Boeing’s manufacturing practices and production lines, including those involving Spirit AeroSystems.

In January, Mr Deal said that Boeing would open its factories to airline customers.

“We are opening our factories … for additional oversight inspections to review our production and quality procedures,” said Mr Deal said, who is also executive vice president of Boeing.

“Spirit will do the same and we will learn from our customers’ insights and findings.”

In its most recent update, the FAA said “all 737-9 MAX aircraft with door plugs will remain grounded pending the FAA’s review and final approval of an inspection and maintenance process that satisfies all FAA safety requirements”.

“Once the FAA approves an inspection and maintenance process, it will be required on every grounded 737-9 Max prior to future operation,” it said on January 17.

Before the Alaska Airlines incident, Boeing had urged airlines to inspect 737 Max aircraft for a possible loose bolt in the rudder control system.

Also last month, the FAA launched an investigation after a Delta Air Lines Boeing 757 passenger plane's nose wheel fell off and rolled away as the jet lined up for take-off.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Updated: February 05, 2024, 12:04 PM