When Dave Calhoun took over as Boeing’s chief executive in January 2020, the company was in crisis. Four years later, with his expected successor starting her role as chief operating officer on January 1, the plane maker is in better shape but the fallout from that crisis — and the pandemic that followed — still lingers.
Calhoun took the top job 14 months after the first of two plane crashes that killed a combined 346 people and nine months after regulators worldwide grounded Boeing’s pivotal product, the 737 Max.
Three months later Boeing’s airline industry customers were rocked by Covid-19 and the collapse in demand for travel.
The former GE executive has overseen the Max’s return to service, which US aviation regulators approved in November 2020. Yet Boeing is still working to deliver jets that it built and stored while the Max was grounded, as well as fixing separate flaws in the 737s made by Spirit AeroSystems, a leading supplier.
Its stock price, at around $261, is 21 per cent lower than on the day Calhoun took over. Even as airlines clamour for more planes to meet resurgent travel demand, its executives have said the company would not return to “stability” until 2025 or 2026.
Analysts believe that some of the items on Boeing’s to-do list, such as continuing to reduce its debt load and transitioning away from the 737 to a new single-aisle aeroplane, are now likely to fall to Calhoun’s successor.
Boeing created the chief operating officer position in December and named Stephanie Pope, head of its services business, to fill the role from January 1. She will oversee the company’s three business units and report directly to Calhoun, setting her up as Boeing’s potential next chief executive. Pope would be the first woman to hold the position.
When Calhoun, a former Boeing director, replaced Dennis Muilenburg as chief executive, “the most important job was to get the Max back in the air, which was eventually achieved”, said aerospace analyst Robert Stallard at Vertical Research Partners. “But then he had to deal with Covid, and the 787 delivery stoppage, the Spirit quality issues, continued losses in defence, etc, etc. It really has been a ‘Whack-A-Mole’ experience since Calhoun moved off the Boeing board to the CEO seat.”
Calhoun was selected in 2020 because he was a known quantity in the industry with good contacts, said RBC Capital Markets analyst Ken Herbert. His first job was to smooth tense relationships with regulators, whom Boeing employees had discussed misleading in internal messages that were made public the week before he started.
The Max crisis, which required restoring regulatory and public trust in the jet, played to Calhoun’s strengths, Herbert said. But Covid, with its threat to the workforce and the way it undermined the supply chain, proved more challenging.
“The board put Dave in because Dave was a good politician,” he said. “[For] Covid, you didn’t need a good politician, you needed someone who was good on a personal level . . . who was deep in the organisation.”
Calhoun had promised a return to Boeing’s engineering roots when he took the helm but the persistent production and quality control issues have dented that promise. The decision in 2022 to move the company’s headquarters from Chicago to Washington, DC prompted criticism from unions for taking management further away from Boeing’s main commercial aircraft factories in Seattle and closer to its government customer.
Boeing insists that progress has been made, pointing to a refreshed top management team, a simplified corporate structure and its hiring of tens of thousands of engineers and mechanics.
The company, Calhoun said on its third-quarter earnings call, had in recent years “added rigour” to its “quality processes”.
“We’ve worked hard to instil a culture of speaking up and transparently bringing forward any issues, no matter the size, so that we can get things right for a bright future,” he added.
Yet the fallout from the Max crashes continues, with Boeing facing added pressure from arch-rival Airbus. The European group overtook the US company as the world’s biggest plane maker by annual deliveries and total order backlog in 2019.
Since then, Airbus has built a commanding lead in the lucrative narrow-body segment of the commercial market with its popular A320 family of jets. It kept delivering planes to airlines during the Covid pandemic and worked closely with suppliers, enabling it to bounce back faster after travel restrictions were lifted.
Airbus now holds a market share of just under 60 per cent in terms of commercial aircraft deliveries year to date, according to data from aviation consultancy Cirium.
Aeroplane manufacturers receive most of their cash from customers when they deliver planes, and with the 2019 grounding of the Max, by far Boeing’s biggest seller, the company has reported net losses every year since.
When Covid hit in March 2020, Boeing tapped bond markets for $25bn, to shore up its liquidity. That brought its debt to $61bn at the end of the second quarter of 2020, with Calhoun remarking at the time that once Boeing stabilised production “we’ll be in good shape to begin that process of returning money to our lenders”.
Total debt stood at $52bn at the end of the third quarter of 2023, but production has not quite stabilised.
Boeing was making 52 737s a month until April 2019. It is now producing 38 a month with plans to increase that to 50 sometime in the middle of the decade. It has said it would be making five 787s a month by the end of this year, an increase from the nadir but still down from the 10 a month it was making at the outset of the pandemic.
Nick Cunningham, analyst at Agency Partners, credits Calhoun for maintaining Boeing’s all-important relations with its banks in the immediate aftermath of the Max crisis and the pandemic, and ensuring that the company survived.
But “in terms of addressing the more fundamental issues”, not much progress has been made, he said, pointing to the ongoing production issues with the Max and the 787 and the fact that “certification of major [commercial] programmes has also been severely delayed”.
“Down at the gritty programme level things haven’t gone so well,” Cunningham said. “Objectively, one would have expected Boeing to be in a strong recovery by now with production [of civil aircraft] much higher.”
Boeing’s defence and space business has also had multiple programme problems and poor profits and cash flow, Cunningham noted.
“Judging by results, it doesn’t look like much has improved. It may be that more has improved under the surface but there is not the evidence for it yet,” he added.
Boeing is still trying to move planes out of storage. In April 2020, during Calhoun’s second quarterly earnings call, it told investors it had 450 planes in storage. Now it is down to 250, including 85 for customers in China. The relationship between China and the US has cooled, and the country has yet to take delivery of a 737 Max since the grounding.
Some of the planes were built during the grounding while others were manufactured this year but still need inspection and potentially repairs. In April, Boeing discovered that Spirit AeroSystems had improperly installed two fittings on the vertical stabiliser on the 737, forcing the jet maker to delay deliveries. Four months later a new problem arose: incorrectly drilled holes in the rear pressure bulkhead of some fuselages.
The problems with the Max would only be over when inventory returned to normal levels, said Morningstar analyst Nicolas Owen.
“The milestone that I’m looking for — they call it stability, I might call it normality — they’re building a plane, and they’re shipping it real soon after that, rather than having 250 planes on the parking lot,” he said.
With Boeing not expecting to reach that point until the end of 2024 at the earliest, in other words, Calhoun and his potential successor still have much to do before it can put the problems he was brought in to fix behind it.
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