From the Editor: Restoring Boeing’s Luster
What would have happened if Boeing’s CEO had rushed to Ethiopia last March to stand beside his Ethiopian Airlines counterpart after the crash of a 737 MAX that claimed 157 lives? If at that early moment he had delivered in person a message of contrition and deep sorrow for the victims and their families? If his company decisively had asked operators to stop flying the MAX out of an abundance of caution until investigators learned more about what caused the second crash of the aircraft in less than five months?
If Dennis Muilenburg had done all that, might he still have his job—and might one of corporate America’s greatest crises have been avoided?
Our industry desperately needs a strong Boeing, and just a year ago it appeared to have one. Muilenburg was Aviation Week’s Person of the Year for 2018, and with good reason: A push into the lucrative aftermarket business was accelerating and major Pentagon contract wins were rejuvenating its defense business. Profits were soaring, and the company’s stock value had more than tripled in three years as Boeing returned mountains of cash to shareholders.
Yes, investigators were probing the crash of a Lion Air MAX in Indonesia that had taken 189 lives, but operational issues, not fundamental flaws in the airliner’s design, were seen as the most critical links in the accident chain. The FAA had determined the aircraft was safe to fly while Boeing devised a software fix for its Maneuvering Characteristics Augmentation System (MCAS).
Then it all changed. Boeing’s public image was battered as it came to light that most airline pilots did not even know of the existence of the MCAS, which triggered both crashes. Boeing’s timelines on the MAX’s return to service proved overly optimistic again and again, vexing customers. Hundreds of undelivered 737s filled up the parking lots near Boeing Field. Relations with the FAA grew testy. And a firestorm of media coverage—some fair, some overly sensational—painted a picture of a company being run by sharp-elbowed and tone-deaf lawyers. The contrition came, but it was late and sometimes appeared calculated.
Muilenburg was fired on Dec. 23 and will be succeeded on Jan. 13 by longtime board member David Calhoun. But his departure hardly will cure what ails Boeing. The company still has to get the MAX back into service. When that will happen is anyone’s guess. It also needs to figure out a next-generation airplane design to compete with Airbus, which has had phenomenal sales success with the Neo, particularly the A321 version.
There are two broader issues at play: culture and governance. Numerous industry veterans believe Boeing’s culture has been infected with arrogance and an emphasis on profits and shareholders over engineering excellence and innovation. The company’s website boasts that Boeing has returned nearly $50 billion to shareholders in dividends and share repurchases over the past five years. Would it not have been better to reinvest some of that in cutting-edge products? Muilenburg, who spent his entire career at Boeing, did not create that culture. He is a product of it. Remember that his mentor, former CEO Jim McNerney, promised “no more moonshots” after the bills for the 787’s delays started mounting.
It is hard to foresee meaningful reform if Boeing’s governance is not fixed. Muilenburg may be gone, but the board of directors that presided over this mess is still in place and sorely needs an overhaul. Can we really expect anything different if the same group keeps calling the shots in the boardroom? Former Continental Airlines CEO Lawrence Kellner, the board’s new chairman, has work to do.
Calhoun, the new CEO, is capable and respected. He spent 26 years at GE and ran its aircraft engines business. He has served on Boeing’s board since 2009 and was a finalist for the CEO position before McNerney got the job. However, that was 15 years ago, and Calhoun has not worked a day job in aerospace since he left GE to run Nielsen in 2006. At 62, will he stay for the long haul? Or will he stabilize the company and groom a younger successor who can take over in 1-2 years and guide Boeing toward making its next momentous decision: when to launch a next-generation narrowbody airliner?
The aviation industry needs a robust, responsible Boeing. It needs a vibrant, reliable competitor to Airbus, and safe and sustainable new aircraft. It is time for some more moonshots.
—Joe Anselmo, Editor-in-Chief