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Boeing announced on July 31 that aviation industry veteran Kelly Ortberg will take over as CEO of the company from August 8. Ortberg, 64, was a mechanical engineer with more than 30 years of experience in aerospace and defense. He facilitated the merger of Rockwell Collins, a British aviation communications and electronic equipment supplier, with United Technologies and Raytheon to form Raytheon Technologies. After the merger is completed, Ortberg will leave Raytheon Technologies in 2021. According to Reuters, Boeing canceled the mandatory retirement age of 65 for Ortberg.

"There is a lot of work to do and I look forward to getting started," Ortberg said in a statement on July 31. He will reportedly receive a long-term incentive bonus of $17.5 million, in addition to an annual base salary of $1.5 million, an annual incentive bonus of $3 million and a cash salary of $1.25 million paid in December.

As a world-renowned aircraft manufacturer, Boeing has been exposed to a series of quality and safety scandals in recent years. In early January this year, a door plug of a 737 MAX passenger plane fell off in mid-air, and the company was in a deep credibility crisis. The U.S. Congress, aviation regulatory agencies and other departments have intervened in the investigation.

The Federal Aviation Administration of the United States required Boeing to make comprehensive rectifications and issued a ban at the end of January to restrict Boeing's production of 737 MAX series passenger aircraft, with monthly production capped at 38 aircraft, and the duration of the ban was not specified.

The U.S. Department of Justice previously reached a deferred prosecution agreement with Boeing regarding two fatal air crashes involving Boeing 737 MAX passenger aircraft in 2018 and 2019. The door plug detachment accident prompted the U.S. Department of Justice to determine that Boeing had violated the agreement and decided to bring criminal charges against Boeing.

Boeing reached a plea agreement "in principle" with the U.S. Department of Justice in early July, agreeing to pay hundreds of millions of dollars in fines and accept the presence of independent monitors to avoid going to court. Whether the plea agreement can take effect is still subject to the approval of a federal judge in Texas. However, the families of the victims of the two air crashes strongly resisted, saying that the agreement condoned Boeing to continue to "put profits above safety."

After the incident, a series of crises triggered a major shake-up in Boeing's senior management. Dave Calhoun, the current CEO who was originally scheduled to step down in 2028, announced in March that he would leave the company at the end of this year. Larry Kellner, chairman of the board of directors, also announced his resignation at the same time, and Steve Mollenkopf took over his position.

Mollenkopf said on July 31 that after Ortberg takes office, Calhoun will continue to serve as a special adviser to the board until March next year.

Reuters believes that Ortberg's appointment shows that the aviation industry hopes that Boeing's outsiders will lead the company out of its predicament. Some industry experts told AFP that in order to lead Boeing to reverse its current unfavorable situation, the new CEO needs to have industry background, strategic wisdom, experience in managing large-scale manufacturing projects and safe production, and the ability to deal with congressional inquiries.

It is reported that Ortberg immediately faced a number of tasks after taking office. First, he had to use his rich experience in mergers and acquisitions to complete Boeing's acquisition of Spirit Aerosystems, a key component supplier; second, he had to negotiate with a machinists' union in the Seattle area to avoid the latter's strike in September; and third, he had to revive the production of the MAX series of aircraft, increasing its monthly output from about 25 in June and July to a maximum of 38 by the end of this year.

While announcing the new appointment, Boeing also released its first half performance report. Unsurprisingly, Boeing's revenue and net profit performance declined significantly throughout the first half of the year.

Financial data showed that Boeing's revenue shrank from US$37.672 billion in the same period last year to US$33.435 billion, a year-on-year decrease of 11%; it recorded a net loss of US$1.794 billion in the first half of this year, while the net loss in the first half of last year was only US$574 million, a year-on-year increase of 212.54%; operating cash flow also turned from positive to negative. The operating cash flow in the first half of last year was US$2.557 billion, but it turned to -US$7.285 billion in the first half of this year.

In terms of commercial aircraft deliveries, Boeing delivered a total of 175 aircraft in the first half of this year, a 34% decrease from 266 last year. Among them, 137 737 series narrow-body aircraft were delivered, a decrease of 79 compared with last year; 22 787 series wide-body aircraft were delivered, a decrease of 9 compared with last year. Correspondingly, commercial aircraft revenue also decreased by 31%, from US$15.544 billion in the same period last year to US$10.656 billion this year.

Boeing said the decline in commercial aircraft revenue mainly reflects a decrease in deliveries and increased costs such as research and development. In the second quarter, Boeing submitted a comprehensive safety and quality plan to the Federal Aviation Administration (FAA), planning to increase the production of 737 series aircraft to 38 per month by the end of the year and the production of 787 series aircraft to 5 per month by the end of the year.

Boeing Chief Financial Officer Brian West said in a conference call with analysts that the company had consumed $4.33 billion in free cash flow in the second quarter and would continue to "burn money" in the third quarter, and expected cash usage this year to exceed expectations.

Several Boeing executives have also mentioned the difficulties Boeing is currently facing in public recently. A supply chain executive previously said that suppliers and airlines have the right to be skeptical of Boeing's aircraft production forecasts, and Boeing's commercial aircraft production has recently declined. In a speech at the opening ceremony of the Farnborough Air Show, the head of Boeing's commercial aircraft admitted that Boeing has disappointed its customers in the past few years and said that the company is promoting "transformational changes" based on feedback from customers, regulators and employees, which will take several years to complete.

As of the close of the U.S. stock market on July 31, Boeing was trading at $190.6 per share, up 2%. Its stock price has fallen nearly 27% so far this year.

Beijing Business Daily Comprehensive Report