Sat | Oct 12, 2024

Boeing names new CEO as it reports dismal second quarter

Published:Friday | August 2, 2024 | 12:07 AM
The Boeing 777X airplane is shown during the Paris Air Show in Le Bourget, north of Paris, France, on June 19, 2023.
The Boeing 777X airplane is shown during the Paris Air Show in Le Bourget, north of Paris, France, on June 19, 2023.
Security members watch a Boeing 777 at the Farnborough Air Show fair in Farnborough, England, on July 18, 2022.
Security members watch a Boeing 777 at the Farnborough Air Show fair in Farnborough, England, on July 18, 2022.
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Boeing named a long-time aerospace industry veteran on Wednesday as its next chief executive, who will take over a company rocked by legal, regulatory and production problems and mounting financial repercussions.

Robert ‘Kelly’ Ortberg, a former CEO at Boeing supplier Rockwell Collins, will succeed David Calhoun as CEO and president, effective August 8, the company said. Calhoun said in March that he would retire at the end of the year, and analysts generally praised the quicker transition.

Boeing announced its new CEO as it reported a loss of more than US$1.4 billion on falling revenue during the second quarter. The loss was wider and the company’s revenue lower than Wall Street’s dismal expectations, as both Boeing’s commercial-airplanes business and defence unit lost money.

The disappointing results come at a tumultuous time for Boeing, which is the subject of multiple investigations into its safety culture and manufacturing quality.

The American aerospace giant agreed to plead guilty this month to a federal fraud charge in connection with its 737 Max jetliner and two crashes that killed 346 people. The Federal Aviation Administration increased its oversight of the company and limited the number of planes it could produce after a panel blew off an Alaska Airlines Max flying at an altitude of 16,000 feet. No one was seriously hurt, but the frightening incident and subsequent scrutiny have damaged Boeing’s reputation.

Boeing Chairman Steven Mollenkopf said Ortberg was chosen after a “thorough and extensive search process” and “has the right skills and experience to lead Boeing in its next chapter”. Ortberg has earned a reputation for running complex engineering and manufacturing companies, Mollenkopf said.

The company waived the mandatory retirement age of 65 for Ortberg, a spokesperson said. Boeing did the same for Calhoun days after he turned 64 in 2021.

Ortberg emerged as a leading candidate only recently. Others who were reportedly considered for the job included Patrick Shanahan, a former Boeing executive and now CEO of its most important supplier, Spirit AeroSystems, and another long-time Boeing executive, Stephanie Pope, who recently took over the commercial airplanes division.

Ortberg led Rockwell Collins from 2013 to 2018, when it merged with United Technologies and wound up as part of RTX, the company formerly known as Raytheon. He retired from RTX in 2021.

Richard Aboulafia, a long-time aerospace analyst and consultant, and recently a harsh critic of the company, said the hire is great news for Boeing.

“He is a deeply respected leader in the aerospace industry, and brings more hope for a better future than the company has enjoyed in decades,” Aboulafia said.

Deutsche Bank analyst Scott Deuschle said Ortberg “has an engineering background, experience in the aviation industry, and experience as a public company CEO”.

In a statement issued by Boeing, Ortberg said, “There is much work to be done, and I’m looking forward to getting started.”

Calhoun will serve as a special adviser to the Boeing board until next March.

Whistle-blower allegations

Like Calhoun, who took over as CEO in the wake of the two Max crashes, Ortberg inherits the leadership of a company facing ongoing crises and criticism from inside and outside the company.

Boeing, based in Arlington, Virginia, is pushing back against whistle-blower allegations of manufacturing shortcuts that crimp on safety. It is dealing with supply-chain problems that are hindering production, which it hopes to fix in part by reacquiring Spirit AeroSystems, a key contractor. It faces a threatened strike this fall by its largest union, the International Association of Machinists.

The company is still trying to persuade regulators to approve two new models of the Max and a bigger version of its two-aisle 777 jetliner. And it faces a multibillion-dollar decision on when to design a new single-aisle plane to replace the Max.

The quarterly earnings reported on Wednesday reflected the continuing challenges at Boeing. The reported loss of US$1.44 billion for the second quarter compared with a loss of US$149 million a year earlier. Since the start of 2019, Boeing has lost more than US$25 billion.

Excluding special items, the second-quarter loss worked out to US$2.90 per share. Analysts expected a loss of US$1.90 per share, according to a FactSet survey.

Revenue dropped 15 per cent, to US$16.87 billion, falling short of Wall Street’s average forecast of US$17.35 billion. The commercial airplanes division had an operating loss of US$715 million, and revenue plunged 32 per cent as Boeing delivered fewer passenger jets to airlines — 92 planes, compared with 136 a year earlier.

The FAA limited Boeing’s production of Max jetliners shortly after the Alaska Airlines incident, but Boeing hasn’t even hit the FAA limits as it seeks to fix its manufacturing process. The company said on Wednesday that it is sticking with its plans to boost production of the Max to 38 per month by year end.

Boeing took a charge of US$244 million to cover a fine it agreed to pay as part of its plea deal with the Justice Department in connection with development of the Max. A federal judge in Texas will soon consider whether to approve the agreement, which also calls for the appointment of an independent compliance monitor, and for Boeing to invest at least US$455 million “in its compliance, quality, and safety programmes”.

Many families of the people who died in the two Max crashes, which took place off the coast of Indonesia in 2018 and in Ethiopia less than five months later, oppose the deal and plan to ask the judge to reject it.

Boeing’s defence and space unit lost US$913 million because of US$1 billion in setbacks to four fixed-price government contracts, including a deal to build two new Air Force One presidential jets. The smaller services business earned US$870 million.

– AP