In recent years, Boeing has experienced a tumultuous journey marked by crises that have shaken its foundation and reputation. However, under the leadership of CEO Kelly Ortberg, the company appears to be charting a course towards recovery and stability. Ortberg, a seasoned aerospace executive, was called out of retirement in 2022 to steer the beleaguered manufacturer through its challenges. As he prepares to share quarterly results, the momentum suggests that significant progress has been made since he took the helm.
Boeing’s stock has seen a remarkable resurgence, climbing over 30% in the first half of 2023. This positive trend is attributed to a combination of factors, including a notable increase in aircraft production and deliveries, which recently reached their highest levels in 18 months. Analysts are cautiously optimistic, with expectations that Boeing will halve its second-quarter losses compared to the previous year. Furthermore, Ortberg has indicated that the company anticipates generating cash flow in the latter half of the year, a critical milestone for a company that has struggled with cash burn.
The shift in Boeing’s fortunes marks a welcome departure from the difficulties that plagued its previous leadership. For years, the company grappled with missed delivery targets, certification delays, and internal cultural issues that frustrated both investors and customers, allowing rival Airbus to overtake it in several key areas. Richard Aboulafia, managing director at AeroDynamic Advisory, noted, “The general agreement is that the culture is changing after decades of self-inflicted knife wounds.” This cultural shift is reflected in improved relationships with major airline customers, who are beginning to see tangible improvements in product quality.
Ortberg’s tenure has not been without its challenges. Upon taking the position, he immediately faced the daunting task of implementing substantial cost-cutting measures, including laying off 10% of the workforce. Additionally, a strike by machinists who build the majority of Boeing’s planes added to the pressure. Ortberg’s decisive actions included a $20 billion capital raise and a reorganization of the defense unit, alongside selling off non-core assets such as the Jeppesen navigation business. His proactive approach has earned him respect within the industry, as evidenced by Ryanair CEO Michael O’Leary’s recent praise, contrasting sharply with his previous criticisms of the company’s leadership.
Despite these strides, Boeing is still navigating turbulent waters. Recent incidents, including a near-disaster involving a Boeing 737 Max 9, have reignited scrutiny from the Federal Aviation Administration (FAA) and highlighted ongoing quality control issues. Furthermore, the company is bound by an FAA-imposed production cap of 38 Max aircraft per month. To elevate this limit, which is essential for meeting market demands, Boeing must engage in discussions with the regulatory body. Analysts suggest that achieving a production rate of 47 Maxes per month is a critical target that Ortberg’s team is keen to pursue.
The defense segment, which includes high-profile projects like the KC-46 tanker and Air Force One, has also encountered its own set of challenges. Delays in these programs have drawn criticism from various quarters, including former President Donald Trump, who sought alternatives in light of Boeing’s setbacks. Ortberg’s leadership has seen a shake-up at the helm of the defense unit, indicating a commitment to addressing these ongoing issues.
Looking to the future, experts agree that Boeing must start considering the development of a new aircraft model. The iconic 737, which first took flight in 1967, is due for modernization, especially as the market evolves. Aboulafia emphasizes the need for innovation, stating, “He [Ortberg] is the guy to make that happen.” The urgency for a new midsize jetliner is growing, particularly as the company works to regain its competitive edge.
In conclusion, while Boeing has made commendable strides under Kelly Ortberg’s leadership, it remains a work in progress. The company is stabilizing, but the path ahead requires continued vigilance, innovation, and a commitment to quality. As stakeholders watch closely, the coming months will be crucial in determining whether Boeing can fully restore its reputation as a leader in the aerospace industry.
