Boeing announced on July 31, 2024 that its Board of Directors has elected Robert K. “Kelly” Ortberg as the company’s new President and Chief Executive Officer (CEO), effective August 8.
Ortberg, who will also serve on Boeing’s board of directors, succeeds Dave Calhoun, who announced earlier this year his intention to retire from the company after serving as Boeing’s president and CEO since January 2020 and as a member of the board of directors since 2009.
“The board has conducted a thorough and comprehensive search process over the past few months to select Boeing’s next CEO, and Kelly has the right skills and experience to lead Boeing into its next chapter,” Steven Mollenkopf, chairman of the board, was quoted as saying in a Boeing press release. “Kelly is a seasoned leader who is well respected in the aerospace industry and has earned a well-deserved reputation for building strong teams and leading complex engineering and manufacturing organizations. We look forward to working with him as he leads Boeing through this critical phase in its long history.”
“The Board would also like to thank Dave Calhoun for his strong leadership at Boeing, first as Chairman and then as CEO, as he steered the company through the challenges of the past several years,” Mollenkopf added.
These “challenges” have caused Boeing to struggle on both the military and civil sides of the business. As of July 31, 2024, Boeing reported second-quarter revenue of $16.9 billion (€15.48 billion), a loss per share under generally accepted accounting principles (GAAP) of $2.33, and a core loss per share (non-GAAP) of $2.90. Boeing stated in releasing these financials that the results “primarily reflect lower commercial delivery volumes and losses on fixed-price defense development programs.”
Boeing’s defense, space and security business reported second-quarter revenue of $6.0 billion.
“The second quarter operating margin of 15.2% primarily reflected $1.0 billion of losses on certain fixed-price development programs, including a $391 million loss on the KC-46A program, largely due to a slowdown in commercial production and supply chain bottlenecks. Losses recorded on the T-7A, VC-25B and Commercial Crew programs reflected higher estimated design and manufacturing costs and technical challenges,” Boeing said.
In the military sector, the main problem is with the US Air Force’s KC-46A Pegasus tanker aircraft. These have already resulted in costs of over seven billion US dollars within the framework of the fixed-price contract program.
In the civil sector, Boeing has been struggling with safety problems for years after two Boeing 737 Max aircraft crashed in 2018 and 2019, killing 346 people. Then, on January 5, 2024, a plug in the emergency exit door of an Alaska Airlines Boeing 737 Max 9 exploded in mid-flight, forcing an emergency landing.
In response to this incident, Boeing submitted a safety and quality plan to the U.S. Federal Aviation Administration (FAA) on May 30 to address what the FAA called “systemic quality control issues.”
Boeing’s new focus on safety also prompted the company to announce on July 1 that it had entered into a definitive agreement to acquire Spirit AeroSystems. Spirit AeroSystems was formed in 2005 when Boeing sold its Wichita division and its Oklahoma operations, bringing Spirit’s Boeing-related work back under direct control.
Meanwhile, in the military sector, Boeing is betting on a new 100,000-square-foot factory to support future fighter programs, which broke ground at the turn of the year. Expected to be completed in 2026, the $1.8 billion factory, which will nearly double the company’s manufacturing space at its site near St. Louis Lambert International Airport, is expected to revolutionize the way Boeing designs, builds and delivers military aircraft by using cutting-edge digital tools and advanced manufacturing techniques.
The most obvious driver for the new facility is the USAF’s Next Generation Air Dominance (NGAD) program. Although the USAF issued a request for proposals for an NGAD engineering and manufacturing development contract in May 2023, expected to be awarded in 2024, this has not yet happened.
As Boeing’s new CEO, Ortberg must therefore ensure that the company’s safety and quality plan is met by adhering almost slavishly to quality control, while in the military sector he must ensure that new contracts are won that make up for the losses incurred by Boeing’s misguided fixed-price contracting programs.
