Boeing’s Comeback Kid: Kelly Ortberg’s First Year at the Helm
After years of hitting one snag after another, Boeing is finally getting its act together, and it’s largely thanks to CEO Kelly Ortberg. This aerospace veteran, who was actually enjoying retirement before Boeing called him back to fix their woes last year, is about to share some exciting news. He’ll be outlining the major strides the company has made since he took over a year ago when Boeing reports its quarterly results and outlook on Tuesday.
Investors are already pretty happy with what they’re seeing. Boeing’s shares have jumped over 30% this year alone! Wall Street analysts are even predicting that the aircraft manufacturer will cut its second-quarter losses in half compared to last year. Plus, Ortberg told investors back in May that they expect to actually generate cash in the second half of the year. That’s a huge deal! Boeing has also ramped up its aircraft production, and its airplane deliveries just hit an 18-month high.
From Crisis to Confidence: A Shifting Culture
This is a big change for Boeing. For a long time, their leaders kept missing targets on everything from aircraft delivery schedules and certifications to financial goals and even culture changes. This really frustrated both investors and customers, while their rival, Airbus, surged ahead. Richard Aboulafia, a managing director at AeroDynamic Advisory, an aerospace consulting firm, put it well, saying there’s a “general agreement that the culture is changing after decades of self-inflicted knife wounds.” Analysts are even expecting the company to post its first annual profit since 2018 next year. Douglas Harned, a senior aerospace and defense analyst at Bernstein, admitted, “When he got the job, I was not anywhere as near as optimistic as today.”
Navigating the Storm: Ortberg’s Tough Decisions
Ortberg certainly had his work cut out for him, and the challenges just kept piling up after he arrived. As the company was bleeding cash, he announced massive cost cuts, including laying off 10% of the workforce. Then, the machinists who build most of their airplanes went on strike for seven weeks until a new labor deal was signed. Ortberg also oversaw a huge capital raise of more than $20 billion last fall, replaced the head of the defense unit, and even sold off their Jeppesen navigation business.
Interestingly, Ortberg bought a house in the Seattle area, where most of Boeing’s planes are made, shortly after taking the job last August. Aerospace analysts say his presence there has been a real positive. “He’s showing up,” Aboulafia noted. “You show up, you talk to people.” Boeing, however, declined to make Ortberg available for an interview.
Overcoming Hurdles: A Turnaround Takes Hold
Many at Boeing had high hopes for 2024 to be their turnaround year. But just five days in, a door-plug blew out of a nearly new Boeing 737 Max 9 as it was climbing out of Portland. This almost-catastrophe led to a production slowdown, renewed scrutiny from the Federal Aviation Administration, and billions in cash burned. It turned out that key bolts were actually left off the plane before it was delivered to Alaska Airlines. This was just the latest in a string of quality problems at Boeing, where other defects have required time-consuming reworks.
Boeing was already reeling from two deadly Max crashes in 2018 and 2019 that really hurt the reputation of America’s largest exporter. In May, the company reached an agreement with the Justice Department to avoid prosecution stemming from a battle over a previous criminal conspiracy charge tied to those crashes. However, victims’ family members were understandably upset when that deal was announced.
For years, executives at Boeing’s top airline customers publicly complained about the manufacturer and its leadership as they struggled with delays. Ryanair CEO Michael O’Leary even told investors in May 2022 that management needed a “reboot or boot up the arse.”
But just last week, O’Leary had a completely different take. “I continue to believe Kelly Ortberg, [and Boeing Commercial Airplane unit CEO] Stephanie Pope are doing a great job,” he said on an earnings call. “I mean, there is no doubt that the quality of what is being produced, the hulls in Wichita and the aircraft in Seattle has dramatically improved.”
It seems like things are truly looking up for Boeing under Ortberg’s leadership. What do you think about Boeing’s recent progress?