Troubled airplane manufacturer Boeing made a big announcement on Wednesday: after a monthslong search, the company has chosen a new CEO, Robert “Kelly” Ortberg, to take the helm on Aug. 8.
Ortberg, the former chief executive of aviation component manufacturing company and Boeing supplier Rockwell Collins, now known as Collins Aerospace, is inheriting a company struggling to recover from an unrelenting series of disasters over the last few years.
Two plane crashes involving the 737 Max 8 jet—one in Indonesia in 2018, and the other in Ethiopia in 2019—killed a total of 346 people and prompted regulators to ground that plane model. Then-CEO Dennis Muilenburg was ousted, and current CEO David Calhoun took over in January of 2020 to try to turn the company around. But in January of this year, the panel of a 737-9 Max flew off an Air Alaska plane midflight, putting the company in the spotlight once more. The Federal Aviation Administration (FAA) responded to the incident by capping the manufacturing rate of Max planes at 38 per month, in order to improve safety. It also withheld approval on a new production line at its facility in Everett, Washington. Consequently, in May, the company said it expected to lose money this year.
Calhoun testified before Congress in June after accusations that the company retaliated against whistleblowing workers who raised concerns about the quality of airplane parts. One whistleblower died by suicide in March during a Justice department investigation into the company.
In July, Boeing agreed to plead guilty in a criminal case against the company, saying that employees misled air-safety regulators before the two crashes that killed hundreds of people. As part of its plea, the company agreed to pay $243.6 million in criminal fines, and $455 million to improve its safety and compliance programs. A judge can accept or reject the deal. The company previously paid $2.5 billion in a settlement with the Justice Department in 2021 that included a $243.6 million fine. Shares in the company are down more than 20% this year.
Fortune reached out to Boeing analysts to hear what they think it will take to turn the company around. They say a cultural change, renewed emphasis on innovation, and improved communication and transparency are the key issues Ortberg must take on in order to succeed.
Change the company culture
Boeing’s repeated missteps have highlighted a critical weakness within the company—its culture. The company's troubles don’t come down to one or two instances of failure, but rather managerial decisions spanning decades that allowed for catastrophic results.
Richard Safran, aerospace and defense equity research analyst for Seaport Global Securities, a capital markets advisory company, tells Fortune that Ortberg should focus on bringing the company back to the basics, making sure workers at every level are clear about what they’re doing and why.
“What he needs is the type of culture NASA used to talk about when they were going to the moon in the 1960s. You could ask everybody from the astronaut on down to the guy sleeping on the floor, ‘What are we doing here?’ And the answer was: ‘Getting to the moon.’ We need to return to a single purpose, single focus: ‘Build the best airplanes and sell them.’”
Innovate
Boeing was once on the cutting edge of aerospace engineering with plane models like the 727, 747, and 767, according to Safran. But no longer.
“Boeing has been talking about new products now for, like, 15 years. They haven't had anything since [2008], when they announced the 787,” he says.
Josh Sullivan, aerospace and defense equity research analyst for Benchmark Company, a research and investment banking firm, agrees, and says that once supply chains have stabilized, Ortberg needs to move the needle on innovation.
“The next and long-term discussion is going to be on the technology front. Part of the displeasure with Boeing is that, despite not having great product performance, they have shied away from technology risks to a degree where their portfolio is considered second place behind Airbus,” he says.
Sullivan adds that this is not a quick-fix situation—it will take decades of hard work.
“He's got to focus on the next 20 to 30 years of Boeing, and what the technology refresh is going to look like, to regain Boeing's leadership against Airbus, Comac, Embraer, and Bombardier. And now Mitsubishi is back in the game. There's a lot on his plate going forward.”
Build better communication and transparency
Another one of Ortberg’s most important executive missions—and perhaps one of the most difficult—is to improve the company’s communication and transparency. Boeing has a lot to make up for after pleading guilty to misleading regulators.
“He needs to rebuild trust. They have lost the confidence of the government and the regulators, of the general public, and most importantly of customers,” says Safran.
That also means changing the way they speak with everyone, from investors to the general public, about what they’re doing to fix their flaws, Frank Oliveri, senior defense analyst for CFRA Research, an independent analysis company, tells Fortune.
“It really comes down to working hard to be credible, to be open and to be honest about these issues, and not shade the truth or pressure the FAA to move things along faster than [what] perhaps is safe.”
He adds that Ortberg should also focus on facilitating better conversations between frontline workers and executives, so that the company can navigate friction within its own workforce, something that is has struggled with in the past.
“How the C-suite implemented changes, and how those changes were communicated to operations, there was significant breakdown there,” says Oliveri. “So there will need to be extreme amounts of training and oversight imposed upon them as well to try to right the ship. A corporate monitor will provide some backup to ensure that Boeing is getting tough love—and they're going to need it to get this together.”
