Boeing Appoints Kelly Ortberg as CEO to Lead Turnaround Amid Rising Cash Burn, Reports Reuters

By Abhijith Ganapavaram and Allison Lampert

Boeing has appointed aerospace industry veteran Kelly Ortberg as its new CEO in an effort to address the company’s ongoing legal and regulatory challenges. This announcement comes during a tumultuous period for Boeing, which reported a staggering loss of over $1 billion in a recent quarter.

Ortberg is set to assume his new role on August 8, facing the significant challenge of restoring trust with regulators, the industry, and the public amid a quality crisis. The company’s Chief Financial Officer has indicated that Boeing will continue to experience cash burn.

The crisis was exacerbated by a serious incident on January 5, when a mid-air cabin panel blew out on an Alaska Airlines-operated MAX 9 jet carrying 171 passengers. In its latest financial results, Boeing reported a loss of $1.4 billion against revenues of $16.9 billion, falling short of analysts’ expectations for $17.2 billion. Per share losses were reported at $2.90, compared to the anticipated loss of $1.97.

Boeing’s CFO, Brian West, communicated to analysts that the company anticipates greater cash usage in 2024 and predicts ongoing cash burn in the third quarter, with free cash flow use reaching $4.33 billion in the second quarter.

Despite these struggles, Boeing shares saw a 2% increase to $190.60 on the day of Ortberg’s appointment. The company’s turmoil has prompted a leadership shakeup, with outgoing CEO Dave Calhoun announcing his resignation by year-end, and board chair Larry Kellner opting not to seek reelection.

Calhoun stated he does not foresee significant changes in leadership with Ortberg’s arrival. Stephanie Pope, who leads Boeing Commercial Airplanes, had been considered a potential successor.

Calhoun will serve as a special advisor to the board until March 2025, as noted by Boeing Chair Steve Mollenkopf.

Following the January incident, the U.S. Federal Aviation Administration limited Boeing’s production of the 737 MAX to 38 jets per month, though the duration of this restriction remains unclear. West confirmed that Boeing had sometimes produced at rates below this level in an effort to address quality issues. Ortberg’s role will involve ramping up production back to the mandated levels by the end of the year.

At 64, Ortberg brings over 30 years of aerospace and defense experience to the role, including various executive positions. He expressed eagerness to begin his tenure, noting the significant challenges ahead. His compensation will include a long-term incentive award targeted at $17.5 million, an annual base salary of $1.5 million, and an annual incentive award of $3 million.

Jon Holden, president of a local union representing over 30,000 Boeing workers, welcomed Ortberg’s appointment and emphasized the need for strong support from the union during this critical time.

Previously, Ortberg led Rockwell Collins and guided its integration with United Technologies until his retirement in 2021. Analysts believe his strong reputation in the industry will benefit Boeing at this juncture. His background includes managing acquisitions, such as the $8.3 billion deal to acquire BE Aerospace in 2016, which will be crucial as Boeing seeks to integrate Spirit AeroSystems after securing a buyback agreement earlier this year.

In another noteworthy aspect, Ortberg’s selection responds to industry calls for an outsider to take charge amid the current difficulties, particularly in contrast to Patrick Shanahan, a former Boeing executive and current CEO of Spirit Aero, who was considered a favorite by some analysts.

During the second quarter, Boeing delivered 92 aircraft, a drop of 32% compared to the previous year, with the defense and space sector significantly impacting the company’s financial performance, leading to a loss of $2.33 per share.

Boeing’s Defense, Space, and Security division has faced substantial financial difficulties attributed to cost overruns on fixed-price contracts, which, while high-margin, have rendered the company vulnerable to inflationary pressures affecting corporate profits in recent years.