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David Calhoun took over as Boeing’s chief executive four years ago in the middle of a crisis that followed a pair of deadly crashes in 2018 and 2019. Both involved Boeing’s best-selling 737 Max 8.
Hopes of a successful overhaul have failed. On Monday, Calhoun said he would step down from the struggling plane maker at the end of the year. Stan Deal, head of Boeing’s commercial aeroplanes unit, will retire with immediate effect. Lawrence Kellner, board chair, said he would not stand for re-election in May.
Any decent planespotter could see this coming. Regulators, airlines, travellers and even Boeing’s workers are in revolt after another terrifying incident in January, in which a door plug on a 737 jet blew off mid-flight. The company is in a reputational crisis.
This C-suite shake-up should be welcomed. Shares in Boeing are down almost a quarter this year and remain down more than 55 per cent from their pre-crisis peak in 2019. The company, saddled with about $47bn in long-term debt, has not made an annual profit since 2018.
Boeing needs a hard reset on how it approaches manufacturing, outsourcing and quality control. Putting an engineer at the helm instead of another bean counter would be a good start.
Yet there is no simple answer to fixing Boeing. It took decades for the company to move away from its engineering roots and it may take years for it to find its way back again. Regulators have not helped matters by letting the industry self-certify its planes.
Boeing has mostly itself to blame. For years, it prioritised short-term shareholder returns over investment. It spent more than $43bn on share repurchases between 2013 and 2019, according to data from S&P Global Market Intelligence. It was able to pay for that by cost savings on its aircraft programme.
Problems have had knock-on effects. Boeing has already struggled to meet its delivery schedule for airlines, including leading European regional airline Ryanair. Southwest Airlines recently had to revise its profit forecasts for this year because of Boeing’s delays.
The dilemma is that it cannot easily afford to develop a new plane from scratch. Boeing warned this month that it would burn more cash in the first quarter than previously expected. Production delays mean plans to reach a $10bn cash flow target by 2025-26 look doubtful.
Boeing is going to need financial support from its investors. Engineering a better reputation will take a long time but it is crucial.
pan.yuk@ft.com