Arlington County, Virginia: Boeing announced on Wednesday that aerospace industry veteran Kelly Ortberg has been appointed as its President and CEO, following a months-long search. Ortberg, a former executive at Rockwell Collins, will begin his tenure on August 8, tasked with the critical role of steering the struggling planemaker toward recovery.
Ortberg, 64, faces numerous challenges, including revitalizing jet production and restoring trust with regulators, the industry, and the public. His appointment led to a 1.4% rise in Boeing’s shares in early trading, despite the company reporting a $1.4 billion loss for the second quarter, largely due to difficulties in its defense and space divisions.
Boeing, one of the world’s two major planemakers, has been grappling with a reputation and safety crisis since a mid-air cabin panel blowout on an Alaska Airlines-operated MAX 9 jet on January 5, which affected 171 passengers. This incident led to the resignation of CEO Dave Calhoun and intensified scrutiny on Boeing’s safety culture, already compromised by previous crashes in 2018 and 2019.
In response to these issues, the U.S. Federal Aviation Administration (FAA) restricted Boeing from increasing production of its key 737 MAX jets beyond 38 per month, without specifying a timeline for lifting this limitation. Despite this, Boeing has reportedly produced aircraft below this threshold to address quality concerns.
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Wall Street Welcomes Appointment
Ortberg, a mechanical engineer with over 30 years in aerospace and defense, has held numerous executive roles, including leading Rockwell Collins and overseeing its integration with United Technologies and RTX until his retirement in 2021. His track record includes managing the $8.3 billion acquisition of BE Aerospace in 2016.
RBC Capital Markets analyst Ken Herbert praised Ortberg’s appointment, noting that while his age might be higher than some investors prefer, his reputation is strong. Jefferies also highlighted Ortberg’s negotiation skills and ability to handle diverse stakeholders.
Ortberg’s new role will involve overseeing Boeing’s integration of Spirit AeroSystems (SPR.N) following a recent deal to buy back the fuselage maker. His appointment addresses industry calls for an external leader to guide Boeing through its current challenges.
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Defense Sector Challenges
Boeing’s defense and space business has faced significant difficulties, contributing to the company’s broader financial strain. The unit has experienced substantial losses in 2023 and 2022, attributed to cost overruns on fixed-price contracts. These contracts, while high-margin, have left Boeing vulnerable to inflationary pressures impacting U.S. corporate earnings.
Boeing has indicated a shift away from fixed-price contracts to mitigate losses, which totaled $1.76 billion last year. As of the Farnborough Air Show, Boeing’s defense unit had been described as “significantly challenged” during the quarter. Boeing CFO Brian West has also projected that the company will experience negative cash flow in 2024 due to reduced jet deliveries compared to the previous year.
