Boeing, which is in the eye of the storm due to quality control issues with the 737MAX aircraft, has experienced a major management shock.
On March 25th local time, Boeing's official website issued two announcements announcing a change in the company's board of directors and management. According to the announcement, Dave Calhoun, President and CEO of Boeing (NYSE: BA), announced today that he has decided to resign as CEO by the end of 2024. Prior to this, he will continue to lead Boeing in completing key ongoing tasks to stabilize the company and prepare for the future.
Boeing official website
At the same time, Boeing Chairman Larry Kerner informed the board that he does not intend to run for re-election at the upcoming annual shareholders' meeting. The board elected Steve Morenkopf to replace Kerner as the independent chairman of the board, and Morenkopf led the board in selecting the next CEO of Boeing.
Boeing Commercial Aircraft President and CEO Stan Deere will retire from the company, and Stephanie Pope has been appointed as the head of Boeing Commercial Aircraft business, effective immediately.
Two consecutive CEOs resigned due to major aviation accidents
After deciding to resign from the position of Boeing CEO, Calhoun delivered a speech specifically to all employees. Calhoun said, "The Alaska Airlines Flight 1282 accident is a watershed for Boeing. We must continue to respond to this accident with humility and complete transparency. We must also instill a comprehensive commitment to safety and quality at all levels of the company."
Calhoun also mentioned that the world's gaze is on Boeing. Over the past 5 years, employees from all over Boeing have been working together to address the significant challenges faced in Boeing's 108 year history. He believes that Boeing's approach to these challenges and how to respond to this specific moment is providing reference standards for future generations of employees and will be integrated into Boeing's operational structure for decades to come.
The "major challenge" mentioned by Calhoun refers to the shadow of the 737MAX8 air disaster. In October 2018 and March 2019, both Lion Air Indonesia and Ethiopian Airlines operated Boeing 737MAX planes crashed, resulting in the death of all passengers on board. Afterwards, the 737MAX suffered a global grounding, and Boeing suffered huge losses as a result.
At that time, Boeing, in order to save its reputation and regain the trust of regulatory agencies, customers, and the public, demanded that the then CEO of Boeing, Millenberg, resign from his position. On January 13, 2020, Dave Calhoun, then Chairman of the Board of Directors, was appointed as the new CEO of Boeing. But in his fifth year of service, Calhoun will resign due to quality control issues exposed by the detachment of the 737MAX9 hatch.
Differently, Milenberg resigned from his position as CEO at the company's request and immediately announced a new successor upon the announcement of his dismissal. According to the latest statement, Calhoun voluntarily resigned and set aside a transition period of up to 9 months.
Former "firefighting captain" Carl Horn
The stark contrast between the two CEOs of Boeing may be related to their respective styles of behavior and external evaluations of them.
The Chairman of the Transportation and Infrastructure Committee of the United States House of Representatives has stated that "under the leadership of Dennis Milenberg, a reputable large corporation has committed a series of fatal mistakes. In his eyes, interests are more important than life safety." The US Aviation Administration has also criticized Milenberg, believing that since the ban on 737MAX flights, Boeing has frequently released information that "it will soon obtain a go around permit," and Milenberg has an intention to pressure regulatory authorities through public opinion.
Opening Calhoun's resume reveals that he had extensive professional experience before joining Boeing. Worked at General Electric for 26 years and served as Vice Chairman; After leaving General Electric, he successively served as the CEO of Nielsen and the head of Blackstone's portfolio operations team.
In a 2020 report by Fortune Chinese website, it was also mentioned that people who are familiar with Calhoun have high praise for him. In their eyes, Calhoun is not only a smooth manager, good at balancing profits and losses, but also a person like a "firefighting captain". A close friend of Calhoun while working at General Electric said, "He is someone who can be trusted. What he brings is not emotions, but logic and belief."
From the recent recovery trajectory of Boeing, it can be seen that Calhoun has indeed made certain achievements in helping Boeing overcome the shadow of the 737MAX air disaster.
On the one hand, as of the end of 2023, the Boeing 737MAX has achieved a go around and returned to the airline's commercial operations globally. In early 2024, the 737MAX resumed delivery in the Chinese market; On the other hand, Boeing significantly reduced its losses in 2023, with losses narrowing by about half compared to 2022 and 2021. The annual revenue was 77.794 billion US dollars, with 528 civilian aircraft delivered, an increase of 17% and 10% year-on-year, respectively.
Similar to Milenberg's resignation back then, Calhoun's decision to resign also had the intention of reshaping Boeing's image and boosting market confidence.
Interface News noticed that after the news of Calhoun's decision to resign was released, Boeing's US stock market jumped 3.5% before trading. After the opening, the stock price remained steadily rising, reaching a high in nearly five days, with a growth rate of 6.27% within the past five days.
In response to the change in management at Boeing, Michael O'Leary, CEO of Ryanair, one of Boeing's major clients, expressed his welcome for the "urgently needed management change" at Boeing, which is "necessary and beneficial" for both the company and its clients.
Cash outflow exceeded $4 billion in the first quarter
After experiencing recovery and development in 2023, 2024 would have been a crucial year for Boeing to accelerate its recovery and narrow the gap with its competitors.
However, the rare aviation accident of the 737MAX cabin door falling off in the air once again plunged Boeing into a "troubled autumn". In the past three months since the accident occurred, multiple regulatory agencies in the United States have been continuously reviewing Boeing, exposing the quality control and quality issues of the 737MAX aircraft.
On March 11th local time, the Federal Aviation Administration of the United States stated that after conducting a six-week audit of Boeing, it found that there were "many quality control issues" with the company. Out of all 89 audits, Boeing passed 56, failed 33, and the failure rate exceeded 37%. A total of 97 possible non compliant situations were identified.
The Federal Aviation Administration of the United States also conducted 13 product audits on the 737 MAX series aircraft fuselage component supplier, Airborne Systems, with 7 of them failing. One audit was related to door plug installation, and another audit related to door plug components identified 5 issues.
On March 12th, Boeing promised to take improvement measures. Boeing Commercial Aircraft Group CEO Stan Deere said in an internal email that the vast majority of violations discovered by the Federal Aviation Administration involve workers not following Boeing's prescribed procedures. Boeing will collaborate with every employee found to have non-compliance issues during the review process to ensure they fully understand the work instructions and procedures. Deere also stated that Boeing will conduct weekly compliance checks on all work teams in the Lenton plant area.
After the cabin door detachment incident exposed a production quality crisis, Boeing's financial situation was also severely affected.
On March 20th local time, Boeing CFO Brian West delivered a speech at the Bank of America Global Industrial Conference. He revealed that Boeing's cash outflow in the first quarter will reach $4 billion to $4.5 billion, and the goal of achieving $10 billion in cash flow by 2025 to 2026 will not be easily achieved. He also stated that Boeing's free cash flow this year will be in the billions of dollars.
West stated that Boeing's commercial aircraft business had a profit margin of approximately negative 20% in the first quarter, as the company paid compensation for the Alaska Airlines accident on January 5th and the incident was more widely affected as a result. It is understood that in early March, three passengers involved filed a lawsuit against Boeing and Alaska Airlines, with a claim amount of up to 1 billion US dollars. West stated that although profit margins will gradually improve, they will remain negative throughout 2024.