Boeing’s New CEO Faces the Challenge of a Lifetime

Kelly Ortberg, the incoming CEO, has many of the qualities needed to steer Boeing in the right direction, yet he will have to navigate a through a challenging and complex legacy.

Boeing has taken a significant step toward transforming its troubled operations by appointing Robert "Kelly" Ortberg as its new CEO and president, effective August 8th. Ortberg, a seasoned aerospace leader, takes over from Dave Calhoun, who has led the company since January 2020. This leadership change is seen as a promising move for the plane maker, which has struggled with a series of challenges over the past few years. However, Ortberg faces the daunting task of overcoming deep-rooted cultural issues and a growing mountain of debt.

A New Leader with the Right Credentials

Ortberg's appointment has already sparked optimism among investors, as evidenced by a rise in Boeing's stock following the announcement. His selection marks a departure from the internal candidates, Pat Shanahan, CEO of Spirit AeroSystems, and Stephanie Pope, Boeing’s head of commercial aircraft, both of whom were strong contenders for the role. Ortberg's status as an outsider is expected to bring a fresh perspective to Boeing, a company that has been plagued by production issues and quality control failures under its previous leadership.

Ortberg’s extensive background in the aviation industry positions him well for the role. He began his career at Rockwell Collins, an avionics manufacturer, in 1987 and rose to the position of CEO in 2013. During his tenure, Ortberg earned a reputation as a hands-on leader who was deeply involved in both engineering and supply chain management. His leadership style, characterized by frequent visits to the factory floor and a focus on innovation, helped Rockwell Collins thrive. After Rockwell was acquired by United Technologies Corp. and later merged with Raytheon to form RTX Corp., Ortberg left in 2021, but his impact on the industry was already well established.

The Challenges Ahead

Despite Ortberg’s impressive resume, the challenges at Boeing are substantial. The company is still reeling from the aftermath of the 737 MAX crisis, which led to the grounding of the aircraft in 2019. Calhoun, who was appointed to steer the company through this crisis, struggled to fully regain the confidence of investors, airlines, and regulators. Quality issues persisted, including a recent incident where a door plug blew out during an Alaska Airlines flight, further tarnishing Boeing’s reputation.

One of Ortberg's immediate priorities will be to address Boeing's cultural issues, particularly the reluctance within the company to raise concerns with management. Creating an environment where problems are addressed proactively will be crucial for restoring Boeing’s standing in the industry.

Financial Woes and the Road to Recovery

Boeing's financial situation is another significant hurdle. The company recorded a larger-than-expected net loss of $1.4 billion in the second quarter of 2024, primarily due to delays in the production of the MAX and the 787 Dreamliner, as well as losses in its defense programs. Boeing’s long-term debt has ballooned to $53.2 billion, which is 37% of the company’s total assets—a stark contrast to Airbus’s 8% ratio. This debt burden is a direct result of the need to support parts suppliers and manage a massive $86 billion inventory of undelivered jets.

Ortberg's success will depend on his ability to meet production targets and reduce this debt. Boeing aims to produce 38 MAX aircraft per month by the end of the year, but achieving this goal is uncertain given the current state of the aerospace industry.

Fresh Start with High Expectations

While Ortberg’s credentials make him a strong candidate to lead Boeing out of its current predicament, the financial and operational challenges he inherits are formidable. Boeing’s future success hinges not only on rectifying its internal issues but also on its ability to innovate and regain its competitive edge against European rival Airbus.

As Ortberg steps into his new role, the aviation world will be watching closely to see if he can steer Boeing back to its former glory, or if the company’s recent tumultuous history will continue to cast a long shadow over its future.