On Wednesday, Boeing (NYSE: BA) named aerospace industry veteran Kelly Ortberg as its President and CEO after a months-long search, tasking the former Rockwell Collins executive with the monumental job of turning around the struggling planemaker.
Ortberg, 64, faces a multitude of issues, including reviving jet production and rebuilding trust with regulators, the industry, and the public. He will start on Aug. 8.
The appointment lifted the planemaker’s share by 1.4% in early trading even as it posted a bigger loss of $1.4 billion in the second quarter due to struggles in its defense and space business.
One of the two global planemakers, Boeing has been mired in a reputational and safety crisis after a Jan. 5 mid-air cabin panel blowout on an Alaska Airlines-operated MAX 9 jet carrying 171 passengers.
That led to an executive reshuffle in which CEO Dave Calhoun decided to step down by the end of the year and board chair Larry Kellner said he would not stand for re-election.
Calhoun will be a special advisor to the board until March 2025, Boeing chair Steve Mollenkopf said on Wednesday.
Shortly after the January accident, the U.S. Federal Aviation Administration (FAA) barred Boeing from raising the production of its cash-cow 737 MAX family of jets above 38 a month, without estimating how long the limitation would last.
However, Boeing (NYSE: BA) has been making aircraft below that level for some weeks to plug quality gaps, Reuters has reported.
WALL ST CHEERS APPOINTMENT
A mechanical engineer, Ortberg has spent over 30 years in aerospace and defense, including numerous executive roles.
After five years leading Rockwell Collins, he steered the company’s integration with United Technologies and RTX until he retired from RTX in 2021.
“This is a strong and safe pick. We can appreciate Ortberg’s age may be higher than some investors would have liked to see. However, we believe Ortberg’s reputation at Rockwell Collins and United Technologies/RTX is strong,” RBC Capital Markets analyst Ken Herbert said in a note.
Ortberg’s experience in integrating acquisitions such as steering Collins through an $8.3 billion deal to purchase BE Aerospace in 2016 will face a fresh test at Boeing.
The planemaker is working to integrate Spirit AeroSystems into its fold after clinching a deal earlier this year to buy back the fuselage maker.
His appointment also addresses the industry push for hiring an outsider to steer Boeing (NYSE: BA) out of its troubles.
Ortberg is a “tough negotiator” capable of dealing with a diverse set of customers and suppliers, Jefferies said in a note published after industry publication Air Current reported that Ortberg was a serious contender.
In the race for one of the top industrial jobs, he pipped Patrick Shanahan, the former Spirit Aero CEO who was seen as a favorite to succeed Calhoun by some analysts and investors.
“There is much work to be done, and I’m looking forward to getting started,” Ortberg said in a statement as Boeing waived its mandatory retirement age of 65 years for him.
“A strong Boeing is great for Southwest Airlines and it’s great for our industry,” said CEO Bob Jordan whose airline is a loyal Boeing customer and among the worst hit by the planemaker’s production woes.
DEFENCE BUSINESS STRUGGLES
During the second quarter, Boeing (NYSE: BA) delivered 92 aircraft, down 32% from last year. It posted a loss of $2.33 a share, as its troubled defense and space business exacerbated the financial strain on the company.
The Defense, Space, and Security unit, one of Boeing’s three main businesses, has lost billions of dollars in 2023 and 2022, which executives attributed to cost overruns on fixed-price contracts.
Such contracts have high margins but leave defense contractors vulnerable to inflationary pressures that have dented U.S. corporate earnings in the last few years.
The planemaker used to bid aggressively for fixed-price contracts before the pandemic but has now said it would pivot away from such contracts to stem losses at the business, which amounted to $1.76 billion last year.
Ahead of last week’s Farnborough Air Show, the unit’s head had said it was “significantly challenged” during the quarter.
Boeing CFO Brian West said in May the planemaker will burn rather than generate cash in 2024, hamstrung by lower jet deliveries compared to last year.
(Source: ReutersReuters)
