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Boeing’s In More Trouble Than You Think

by Staff

How much worse can things get for Boeing?

It feels like the aviation titan makes the headlines every day. Since my last article, Boeing has had a seemingly endless stream of problems: A United Airlines 737 Max reported that the flight controls jammed as the plane landed in Newark. The FAA flagged issues with de-icing equipment on 737 Max and 787 Dreamliner planes, prompting concerns that the engines could lose thrust. And most recently, a Latam 787 Dreamliner flight from Australia to New Zealand plunged mid-flight, injuring 50 people, some of whom were thrown out of their seats into the ceiling of the plane. The Justice Department has opened a criminal investigation into the company, and the FAA has expressed extreme frustration with Boeing’s responses to its queries as it investigates the loss of a door plug on an Alaskan Airlines flight that began the company’s run of troubles.

In my last article, I said I’d make some suggestions for the company’s path forward. But as recent events have unfolded, I’ve heard from several people with insider knowledge of Boeing’s culture. My biggest takeaway, beyond my gratitude for their coming forward? Things are far worse than I thought (and I’ve been saying Boeing is in trouble for 14 years).

Boeing’s troubles start with the fact that its financial situation is worse than it seems. Boeing is split into multiple divisions, including Defense, Commercial, and Global Services (a division offering aircraft maintenance, modification, and repair, among other services). Boeing has historically relied on Defense to paper over the gaps when Boeing Commercial stumbles. The United States defense budget, however, is likely to remain functionally stable—or perhaps even decrease after accounting for inflation—for the foreseeable future, as the US government’s fiscal resources are constrained by mounting deficits, high interest rates, and increasing entitlement spending. Absent a major change in US government priorities, there simply isn’t room in the defense budget for Boeing to grow enough there to make up for its losses in civil aviation.

The cavalry isn’t coming. And perhaps more concerning is the fact that Boeing does not seem to recognize that the situation is bad and is likely to get worse—even without major government intervention, which is looking more likely by the day. Admittedly, some of the problems are likely not Boeing-specific. Other airplanes have experienced safety issues in the past: In 2021, Qatar Airways sued Airbus over chipped paint on its A350 aircraft that exposed copper mesh, citing a safety risk. In 2018, one third of Pratt & Whitney-powered A320neo aircraft were affected by a new engine glitch. But in light of the recent string of crises, anytime anything happens with Boeing, news headlines will inevitably spotlight it.

Boeing clearly has a PR problem.

But more significantly, it has a leadership and culture problem. As I wrote in 2020 and again just a few weeks ago, what Boeing needs is engineers—not financiers—to lead it into the future. That’s not to say that the engineers in Boeing’s past have been perfect—that’s far from the case. Nor is it to say that Boeing’s non-engineer leaders have all failed: Bill Allen, the greatest CEO in Boeing’s history, was a lawyer. Boeing’s problem is that the engineers have essentially been squeezed out of its culture and approach. Its historic commitment to engineering excellence has been abandoned and replaced by a Jack Welch-style obsession with Return on Net Assets.

Dave Calhoun, Boeing’s current CEO, has only had the job for three years. But he has been on the board since 2009—he wasn’t exactly uninvolved with Boeing’s downward spiral. The recent Boeing crises haven’t come out of the blue and certainly shouldn’t have surprised Calhoun, who was brought on in 2020 to replace former CEO Dennis Muilenburg (Muilenburg got pushed out after 346 people were killed in the 2018 and 2019 Boeing 737 Max 8 crashes).

Calhoun should have been ahead of this a long time ago. Instead, things seem only to have gotten worse on his watch. And at least so far, he hasn’t seemed interested in returning Boeing to its past greatness. In November, for example, he announced that Boeing would not develop a new airplane for at least another 10 years. Boeing’s last “clean sheet” airplane—a new plane designed entirely from scratch—was the 787, which was launched in 2009. When he made that statement, he essentially told an entire generation of Boeing engineers that they would spend their entire career without pushing forward the civil aviation state of the art. What gifted aeronautical engineer, knowing that, would choose to work at Boeing?

Why has Calhoun made these choices? His background gives us a clue. Calhoun is an accountant trained by Jack Welch—the man who turned General Electric from the world’s greatest industrial conglomerate into a hedge fund that happened to own a few factories. It’s Jack Welch-style management, more than anything else, that has put Boeing into its current crisis, as brilliantly described by the legendary aviation analyst Richard Aboulafia on the Odd Lots podcast. In fact, if you look at Boeing’s senior executives, Calhoun’s lack of engineering background is typical. Stephanie Pope, his COO, is also an accountant. Of the first nine senior executives listed on Boeing’s site, only two hold engineering degrees.

It is time—in fact, it’s long past time—for Boeing’s board to step in (a note here—one Board Member, ret-Adm. John Richardson, was the Chief of Naval Operations on whose Senior Executive Advisory Panel I served. He is a brilliant engineer and a great leader, someone for whom I have the highest respect, but we have never communicated on anything involving Boeing.)

Boeing needs dramatically new leadership, and I’ll outline my suggestions soon. It also needs a new strategy and culture. Or, actually, it needs an old culture—the one it used to have, before successive generations of leaders—Wall Street disciples more interested in squeezing out an extra penny per share in their next quarter than building the sorts of planes that had made Boeing great—squandered the legacy of one of America’s most iconic and important companies.

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