After parting ways with the top leader of the previous engineering company for 56 months, Boeing will once again return to the era of being led by engineers on August 8th.
Robert K. Otterberg, who is about to take office as the new President and CEO of Boeing; quot;Kelly" Ortberg， Ottoberg is facing the same challenge as his predecessor David Calhoun when he took office over four years ago: how to revive this once dominant manufacturing giant. And this is also the main reason why Calhoun announced his retirement early. Although the board praised him for "leading the company to address various challenges in recent years", he failed to help Boeing get out of trouble and rebuild competitiveness, and even fell into more troubles and crises, which doomed the hasty end of the "Savior 1.0 era".
Returning to tradition?
Since Calhoun announced in March this year that he would retire at the end of the year, who will take over this troubled company has become a focus of attention both inside and outside the industry, and the "selection" work has also been launched.
For several months, including Stephanie Pope, who currently serves as the CEO of Boeing Commercial Airplanes, Pat Shanahan, CEO of Spirit AeroSystems, a supplier recently acquired by Boeing, and some leaders of top companies in the industry have been associated with this seemingly "hot" position. However, for successors, the temptation to help Boeing, an industrial giant with huge global influence, return to the right track is completely worth taking the risk of.
Boeing Chairman Steven Mollenkopf said, "In the past few months, the board has conducted a comprehensive and extensive search to select Boeing's next CEO, and Ultraberg possesses the appropriate skills and experience to lead Boeing in the new phase. Ultraberg is an experienced leader highly respected in the aerospace industry, renowned for building strong teams and operating complex engineering and manufacturing companies. We look forward to working with him to lead Boeing through this critical period in its long history
Boeing announced on July 31st that the 64 year old Otburger holds a Bachelor's degree in Mechanical Engineering from the University of Iowa. I have over 35 years of leadership experience in the aerospace industry.
Otterberg's LinkedIn profile shows a career track record that is strong enough to "stay on the ground". He previously served as the CEO of Collins Aerospace, a United Technologies company formed by the merger of United Technologies and Rockwell Collins in 2018. Collins Aerospace is a global leader in the aviation and defense markets, with annual sales of $23 billion and 70000 employees worldwide.
Ottoberg joined Rockwell Collins in 1987 as a project manager and held increasingly important leadership positions within the company, ultimately becoming president and CEO in 2013. Ottoberg led Rockwell Collins to complete the two largest acquisitions in the company's history, acquiring flight service provider ARINC and cabin interior supplier B/E Aerospace in 2013 and 2017, respectively. According to industry evaluations, Ottoberg led Rockwell Collins to "reshape the aerospace industry landscape and help the company develop into an important first tier supplier.
Rockwell Collins announced its merger with United Technologies Corporation in 2018 and merged with the then United Technologies Aerospace Systems Corporation to form Collins Aerospace Division. In April 2020, United Technologies merged with large defense giant Raytheon to form Raytheon Technologies, which was later renamed RTX.
Boeing stated that Ultraberg has held many important leadership positions in the industry, including being a director of RTX Corporation. In addition, he also serves as a director of Aptiv PLC, a global technology company that is a leader in the vehicle system architecture industry. He also served as the Chairman of the Board of Directors of the American Institute of Aeronautics and Astronautics (AIA).
From the current situation of Boeing, the new leadership will face enormous difficulties, and it is difficult to judge the prospects. However, from the perspective of the overall direction of change, it seems that there is some hope compared to before, "a US based aviation manufacturing industry analyst said in a conversation with reporters from the Huaxia Times." Most of the problems that Boeing urgently needs to solve now are concentrated in the production and manufacturing field, and the return of engineering culture is crucial
Another significant change comes from the possibility that Ultraberg may lead the executive team to relocate the office from its current location in Virginia back to its hometown of Seattle, Washington. Although it has not been officially announced yet, according to reports from multiple sources including those close to Boeing and industry veterans, after taking office, Ottoberg will relocate his office to Seattle, which is also the location of Boeing's main production and manufacturing facilities.
In 2001, Boeing relocated its headquarters from Seattle to the central American city of Chicago, and in May 2022, it moved again to Arlington, Virginia. Prior to this, Boeing had sold many properties located in Washington State, including the headquarters office building of the Civil Aircraft Group. According to Calhoun's statement at the time, "Given that the new global headquarters is located in a region close to our customers and stakeholders, and has access to world-class engineering and technical talent, this region has strategic significance for our global headquarters
According to a person close to Boeing who spoke with a reporter from Huaxia Times, "If Ultraberg chooses to work in Seattle, it is clearly indicating an attitude, and other executives are likely to follow suit. In fact, it has had an effect that the company's headquarters has returned to the West Coast, which is also where this once powerful company established its foundation
Difficult Start
For Boeing, although the impact of the 737MAX crash a few years ago and its aftermath has gradually faded after a series of adjustments, the Alaska Airlines 737MAX9 door plug detachment that occurred earlier this year has once again exposed many new problems in production organization, supply chain management, and quality hazards. At the same time, it has caused regulatory troubles and had a huge impact on the production capacity improvement and delivery of civil aircraft products, and further transmitted to financial indicators.
According to Boeing's latest financial report, it incurred a loss of $1.4 billion in the second quarter, with a 32% decrease in civilian aircraft deliveries compared to the same period last year. Boeing's revenue for the second quarter was $16.9 billion, with a loss of $2.33 per share. Compared to the same period in 2023, revenue has decreased by 15%, while earnings per share have increased almost tenfold. As of the end of June 2024, Boeing's net debt was approximately $45.3 billion, an increase of approximately $5 billion from the first quarter of 2024.
Due to restrictions from the Federal Aviation Administration on increasing production capacity, Boeing has set a monthly production target of 38 single aisle aircraft by the end of the year. This not only does not match its reserve orders and market demand, but also falls far short of Boeing's actual production organization capacity.
If we also consider the impact of the current aviation manufacturing supply chain still far from returning to normal, the impact on the financial situation may continue.
A series of unfavorable factors may have contributed to Boeing's extremely low-key appearance at the recently held Farnborough International Airshow in the UK. According to Boeing, it has adjusted its participation in the 2024 Farnborough International Airshow, "focusing on strengthening safety and quality, fulfilling customer commitments, while showcasing next-generation technology and capabilities
Boeing did not bring some of its latest developed prototypes to the airshow for flight demonstrations and ground displays like other previous airshow events. According to Dr. Brendan Nelson, President of Boeing International Group, "The company is currently focused on implementing a comprehensive safety and quality plan and fulfilling customer commitments. Based on these priorities, we have reduced aircraft displays and flight demonstrations at airshow and focused our energy on new technology, sustainability, safety, and service solutions. The best way to build trust is through the top-notch performance of our factory, paying attention to every aircraft
However, compared to last year's dismal order harvest at the Paris Air Show, although Boeing still lags behind its old rival Airbus in terms of total order volume this year, it is evident that there has been a significant improvement in order quality.
Boeing received a total of 96 confirmed orders and 22 committed orders at Farnborough, with the largest order coming from Korean Air, which ordered a total of 20 777X and 20 787-10 aircraft, as well as 10 intended orders for 787-10 aircraft. Qatar Airways has also announced an order for a total of 20 777X aircraft.
An exhibitor, while communicating with a reporter from Huaxia Times during the air show, said that although the absolute quantity is not large, Boeing's orders still demonstrate its competitiveness in wide body aircraft. "The demand for wide body aircraft in the market itself is much smaller than that of narrow body aircraft, so it is particularly important to 'get stuck' in order competition
Boeing also released its latest market forecast report during the air show, predicting that global aircraft deliveries will grow by 3% in the next 20 years, and global airlines will need nearly 44000 new civilian aircraft by 2043.
Boeing has stated that in an increasingly interconnected world, the demand for air travel continues to exceed economic growth. Four years after the pandemic grounded most of the global civil aviation fleet, air traffic growth has returned to the long-term trend predicted by Boeing 20 years ago. According to the outlook for the civil aviation market in 2024, air passenger traffic is expected to grow at an average annual rate of 4.7% over the next two decades compared to 2023. The number of routes served by global airlines has returned to the level of 2019, with nearly 20% being new routes, reflecting the adaptability of the aviation industry in a dynamic market.
Boeing's forecast data shows that the Eurasian region is expected to become the largest market for aircraft deliveries in the next 20 years (accounting for 22% of the total), followed closely by North America (20%) and China (20%). In the newly added demand, single aisle aircraft will account for 71% of the fleet by 2043, with a total of 33380 new aircraft delivered previously due to its flexibility in serving short and medium haul routes. And the global wide body fleet will more than double, with dual aisle aircraft accounting for 44% of the Middle Eastern fleet.
But for Boeing, its competitiveness in the single aisle aircraft market has clearly fallen behind its competitors, and under many unfavorable factors such as limited production capacity and supply chain impact, delivery volume is also difficult to significantly increase in the short term, which will have a significant impact on cash flow. Therefore, the process of research and development, manufacturing, and certification of its wide body aircraft products will become even more important.
During the earnings conference call on July 31st, Boeing Chief Financial Officer Brian West revealed that the 777-9 model currently undergoing testing is "currently undergoing certification procedures and is still expected to begin delivery in 2025
In terms of the progress of certification for narrow body aircraft, Calhoun stated during the earnings call on July 31 that "by mid-2025, both the 737-7 and 737-10 will be certified
For Boeing, another positive sign comes from China. According to information obtained by our reporter from multiple channels, the previous suspension of delivery due to the impact of cockpit voice recorder battery certification has been resolved, and new aircraft deliveries to Chinese airlines have recently resumed. Meanwhile, the completion and delivery center established by Boeing in Zhoushan, Zhejiang has also begun to resume delivering 737 MAX series aircraft to Chinese airlines.