Sitting in a conference room next to his 36th-floor office overlooking downtown Chicago, Boeing Chairman, President and CEO Dennis A. Muilenburg radiates energy and optimism. Even when the conversation turns to the challenges the company faces, his smile is unchanged.

Muilenburg has much to smile about. Since taking over leadership of the world’s largest aerospace and defense manufacturer in mid-2015, the 55-year-old has seen Boeing grab a bigger share of the profits in the $370 billion-a-year commercial aircraft industry and bounce back in defense with a series of high-profile wins. Challenges ramping up narrowbody airliner production and delivering the U.S. Air Force’s KC-46A tanker have made little dent in the company’s financial performance.

Of course, there are questions about the launch of Boeing’s next all-new airliner, its squeeze on the supply chain, the risk of increased vertical integration and the long-term costs of bidding low to win key defense business. But the aggressive course Muilenburg has charted is only gathering speed.

The creation of a stand-alone Global Services operation as a third business pillar that aims to generate $50 billion a year in aftermarket revenue by the mid-2020s has served notice that Boeing will make money on its airliners not just at the point of sale but throughout the 25-30 years they are in operation. It is a transformative shift away from the way the industry has done business for decades. 

Boeing has further roiled its supply chain by insourcing more aircraft components, most notably the composite wings on the 777X but also avionics and nacelles and—via joint ventures—seats and auxiliary power units. In October, the company acquired KLX, a leading aviation parts distributor, for $4.25 billion, and two months later finalized the terms of a $4.2 billion deal to acquire a majority stake in the commercial division of Brazilian aircraft manufacturer Embraer (although the politically sensitive deal won’t close for months). And Boeing moved closer to a go-ahead in 2019 to develop the new midmarket airplane (NMA).

“The guy is intensely focused on what he wants to achieve,” says Kelly Ortberg, CEO of United Technologies Corp.’s Collins Aerospace, a leading supplier to Boeing. “His footprint is felt in the industry.”

In defense, Boeing resorted to surprisingly low bids to sweep competitions in recent months for three multibillion-dollar Pentagon contracts: the MQ-25 unmanned refueling tanker, Huey helicopter replacement and T-X trainer. While some analysts question how the company will ever turn a profit on those programs, the wins reinvigorated its Defense, Space and Security operation in St. Louis, ensuring that Boeing will be around to bid when the Pentagon launches a sixth-generation fighter program.

Boeing’s big year was not without setbacks. Progress on the late and over-budget KC-46 tanker program remained painfully slow. The company also lost a high-profile trade dispute with Bombardier, supplier shortfalls temporarily slowed assembly of Boeing 737 narrowbody jets, and questions about an Oct. 28 crash of a Lion Air 737 MAX 8 put Boeing under a negative media spotlight.

On the plus side, Muilenburg has managed to stay on the good side of volatile U.S. President Donald Trump, who initially accused Boeing of bilking U.S. taxpayers on an Air Force One replacement contract. Muilenburg has so far kept the company out of a nasty trade war between the U.S. and China, a key customer for passenger jets. And Boeing has satisfied a vital stakeholder: investors.  Shares were trading 157% higher under Muilenburg’s leadership as of Dec. 31, and the company has returned hordes of cash to shareholders, announcing on Dec. 17 another 20% increase in its dividend and authorization for up to $20 billion for share repurchases. 

Muilenburg also has firmly fixed one eye on the future. “I’m convinced that the first person that gets to Mars is going to get there on a Boeing rocket,” he has famously said.

Boeing acquired aviation autonomy and robotics powerhouse Aurora Flight Sciences in late 2017, and its HorizonX operation seeds investments in next-generation technologies through acquisitions, partnerships with “nontraditional” entities and work on disruptive business models and technologies. Muilenburg will talk overtime about futuristic endeavors such as hypersonic travel and how he plans to keep the 102-year-old company and its 140,000 employees relevant for decades to come as the pace of technological change accelerates. 

“It’s not going to be all that long before you can connect any two city-pairs in the world in a couple of hours, and Boeing is going to be at the leading edge of that capability,” he tells Aviation Week. “Imagine a Mach 5, Mach 6 transportation capability. It’s not decades and decades away; that’s kind of in a 10-year horizon.”

Aviation Week editors annually select a Person of the Year. The recognition is not an honor, but rather a reflection of someone who has had a major impact on the aerospace or aviation industries, for better or worse. Muilenburg’s mark on the industry is undeniable, and he is our pick for 2018 Person of the Year.

Muilenburg loves to talk about what he calls his “values-based” outlook. “We’re a tough competitor,” he says. “But there’s no occasion where we want our employees to be faced with a choice of competing or values. That’s a false choice.”

Those values were shaped growing up on a farm in rural Iowa. He studied aerospace engineering at Iowa State University and took a summer internship at Boeing in Seattle. “I hopped in my 1982 Monte Carlo and drove from Iowa to Seattle,” he recalls. “It was the first time I saw the Rocky Mountains. I saw the ocean for the first time.”

After being hired by Boeing in 1985, he spent 15 years in the Seattle area in a variety of program management and engineering positions on both commercial and defense programs. His father would check up on him. “He’d say, ‘Dennis, how is it going?’” says Muilenburg. “And I would describe the work I was doing as an engineer. It was different than farming, but he understood it. And then, as I got into my executive jobs, he’d say, ‘Well, Dennis, what did you do today?’ And I’d describe it to him, and he’d always pause and say, ‘Dennis, what did you actually do today?’ It always reminded me to think about the value you’re adding.”

Muilenburg’s rise through Boeing was meteoric, but his track record was far from perfect. He was director of weapon systems for the company’s Joint Strike Fighter bid, which lost to Lockheed Martin. He was Boeing’s program manager on the Future Combat Systems, a massive U.S. Army-led network-centric weapons modernization effort that was canceled in 2009. And his leadership of Boeing Defense, Space and Security in 2009-13 received mixed reviews as the unit lagged some of its peers in growth.

But Muilenburg’s promotion to president of Boeing in late 2013 signaled that the Iowa farm boy was the odds-on favorite to succeed Jim McNerney, the Yale- and Harvard-educated CEO who had restored order after an era of corporate scandals and huge market-share losses to Airbus. Muilenburg was named to the top job 18 months later. 

While his talents were well known, his willingness to act boldly and take risks was less obvious. “Muilenburg’s views are unknown,” Leeham analyst Scott Hamilton wrote at the time. “He came into the presidency from the defense side and hasn’t said much about commercial. . . . What course he will chart as No. 1 will be watched closely.”

Few developments mark the modern transformation of Boeing as much as the Partnering for Success (PFS) squeeze on the supply chain and the vertical integration of certain technologies. Though PFS was conceived under McNerney, Muilenburg kicked it into high gear with what became known as PFS 2.0. That effort culminated with the signing in late 2017 and 2018 of master contract agreements with key suppliers such as United Technologies Aerospace Systems (UTAS), Rockwell Collins, Spirit AeroSystems, Transdigm, Triumph, Leonardo, Kawasaki Heavy Industries, Mitsubishi Heavy Industries and Subaru.

While PFS was originally focused on squeezing price cuts from suppliers, 2.0 and the master agreements drove further change, setting performance imperatives and requiring continuous cost-cutting and efficiency gains to ensure a place on the NMA if Boeing launches the new airliner.

PFS and Boeing’s vertical integration efforts, including into avionics, are believed to be factors in United Technologies’ recent $30 billion acquisition of Rockwell Collins, which was combined with UTAS to create Collins Aerospace. But Collins CEO Ortberg claims no grievances with Boeing. “Dennis has been very clear, he sees a big role for the supply chain,” he says. “He’s not trying to take the supply chain out.”

Michael Goldberg, a Bain & Co. partner who leads the firm’s global aerospace and defense practice, agrees. “Look at where the profit pool is,” he says. “The Tier 1 and Tier 2 suppliers for years have made substantially higher margins than the primes. He’s not trying to bankrupt the supply base; he’s just trying to get his fair share of the profit pool.”

But the squeeze on suppliers could grow tighter if Boeing launches its new NMA airplane. “The rules will be, ‘If you want to be on my aircraft, you’re going to pay me a royalty on some portion of your aftermarket revenues,’” predicts Kevin Michaels, managing director of AeroDynamic Advisory. “I think that’s coming.”

The question is how hard Boeing can squeeze without breaking the supply chain, as some accuse Ignacio Lopez of doing at General Motors during similar efforts in the 1990s. Not surprisingly, PFS has spurred leading suppliers to seek their own cost savings from further down the supply chain. But smaller suppliers often are not buffered by aftermarket revenues and are more fragile financially, warns Michaels. “I worry that the conditions that are cascading down the supply chain to the lower tiers could put us at or near the breaking point. They’re heaping on more risk, especially on the companies you never hear about.”

Boeing’s about-face on vertical integration-—which it famously eschewed with the 787 program—also holds risks. Teal Group analyst Richard Aboulafia says the insourcing saddles Boeing with large fixed costs that would be a drag on finances if a downturn hits and commercial aircraft production slows. “Everything Muilenburg is doing is great if you believe there will never be a downturn again in this previously cyclical industry,” says Aboulafia. “I applaud him for some things, but the vertical integration is just dangerous.”

For now, though, there are few clouds on the horizon. Boeing’s commercial backlog stands at 5,873 airplanes. The big problem for the company as well as for Airbus is how they will ramp up production to meet seemingly insatiable demand for new airplanes, particularly in the Asia-Pacific region, where millions of new travelers are entering the middle class each year. 

Analysts point out that the pressure to cut costs is driven in part by an intense competition between Boeing and Airbus. While inflation has risen more than 50% in the past two decades, Michaels estimates actual prices for single-aisle Boeing 737-family and Airbus A320-family passenger jets have barely gone up over the same period.

“Boeing is squeaking out 15% returns and taking enormous capital risks,” says Bank of America Merrill Lynch analyst Ronald J. Epstein. “The question I get from investors is why this is such an irrational duopoly. What would happen if both Boeing and Airbus doubled their prices? Their backlogs would be smaller, and they would be making a lot more money.”

Muilenburg’s plan is to make a lot more money by focusing on the aftermarket, which in 2018 was added to the company’s long-term forecast. Boeing projects a market for $8.8 trillion in commercial aviation services over the next 20 years, bigger than the $6.3 trillion market for sales of aircraft.

“We see a market in which airlines outsource more and more, data analytics help aircraft and airline networks become more efficient and reliable, and new technologies provide new services solutions,” Randy Tinseth, Boeing’s vice president for commercial marketing, said at last summer’s Farnborough Airshow. 

With Boeing’s services revenues projected to come in around $16.5 billion in 2018, the company has a long way to go toward reaching its $50 billion target by the mid-2020s. But with Boeing controlling just 7% of the commercial aircraft services market, Muilenburg is sticking with his target. 

“I think initially people said, ‘That’s really not possible,’” he acknowledges. “[There is a] long ways to go, but the strategy is working.” He counts the creation of the Global Services unit as one of the most significant accomplishments of the past three years. “That was a big change for Boeing, the first big structural change we’ve made in this company for decades,” he says.

Boeing Global Services CEO Stan Deal tells Aviation Week that while acquisitions such as KLX and Embraer will help reach the $50 billion goal, Muilenburg’s “One Boeing” strategy will be the centerpiece. Boeing’s commercial and defense divisions used to be famously distinct, but Deal says he works closely with Boeing Commercial Aircraft CEO Kevin McAllister and Defense, Space and Security CEO Leanne Caret. “Kevin and I are at the table for the NMA, and Leanne and I are at the table together for the T-X,” he said last June.

So is it conceivable that Boeing could go the way of IBM, a company that has evolved from making industry-leading computers into a services powerhouse? That is not happening, Muilenburg says.

“Aerospace machines are extraordinarily complex and technical,” he explains. “They are not easily commoditized. . . . Our OEM [original equipment manufacturer] knowledge is one of the things that gives us the strength in growing services because we understand how we can create more value for customers.”

With Boeing on the cusp of reaching $100 billion in annual revenues, Muilenburg is executing his strategy from a position of strength. He leveraged the cash generated by the company’s booming commercial airplanes business to sweep the Pentagon’s MQ-25, Huey replacement and T-X contracts with ultra-low bids that pure-play defense companies could not match. But fears that such aggressive pricing is the new norm are probably overblown. “There is a fear that Boeing could go out and bid every defense contract at a loss,” Epstein says. “That makes no sense.”

Such a strategy would conflict with Muilenburg’s goal of reaching mid-teen margins for each of the company’s divisions before the end of the decade. For the CEO, it is all about catapulting Boeing into a new realm.

“Our aspiration is no longer to be just the best in aerospace,” Muilenburg says. “We have to be a global industrial champion. This higher bar is part of how we’re going to win in our second century. That has expectations around financial performance and growth, but it’s bigger than that. It’s all the things we’re doing to transform the enterprise.”

Cowen and Co. analysts have declared Boeing their top stock pick going into 2019. Cowen’s Cai von Rumohr and his team see the company benefiting from gradual ramp-ups in commercial aircraft production, stable pricing, supplier concessions, no upcoming labor negotiations and 787 production shifting to the more profitable -9/-10 models. 

“The current decade is far more conducive to profitable jet aircraft production than any of the prior four,” Cowen analysts write. “A key reason is that as the industry has matured, production has stabilized, with year-over-year swings currently averaging 7% versus 17-46% in prior decades. That is important, because large fluctuations limit profitability.”

Asked if he is willing to declare success in becoming a global industrial champion, Muilenburg demurs. “We can declare progress,” he says. “We have to continue to drive this innovation machine, right? The pace of innovation, the technology disruptions that are happening around us are massive.”  

Muilenburg’s enthusiasm for his role as Boeing’s leader is palpable. “He’s an airplane guy; he’s part of the industry,” observes Epstein. “His excitement is real. He seems like a CEO that really likes what he does.” 

With Lee Ann Shay in Chicago, Graham Warwick and Mark Nensel in Washington and Victoria Moores in London.