Tim Hefer, Allison Lampert and David Shepardson
(Reuters) – It took 80 days. But for the aviation industry this was enough.
An uprising of U.S. airline executives helped topple Boeing’s (NYSE:) top executives this week, including CEO Dave Calhoun, ending weeks of pressure following the bizarre Jan. 5 door plug blowout on an Alaska Airlines 737 MAX 9 passenger plane, people. someone familiar with the discussions said.
As the company’s major U.S. customers agitated for a board meeting without Calhoun, Boeing’s board preempted their demands with major upheaval.
Now, after a shakeup that removed Boeing’s CEO, chairman and head of Boeing’s commercial aircraft unit, airlines face prolonged uncertainty over jet supplies and calls for deeper changes – starting with the selection of a manufacturing heavyweight as CEO .
“It wouldn’t surprise me if people said, ‘What exactly is Boeing’s strategy to change this rather than bandage it,'” former Air Canada CEO Calin Rovinescu told Reuters.
“There comes a point when you can’t pretend that everything is fine. And I think that was the call to action that you probably heard from the airline community.”
Boeing said it had nothing to add to comments from Calhoun, who told employees on Monday that he had been considering stepping down as CEO for some time. He added that the company “will fix what’s broken and we will put our company back on the path to recovery and stability.”
The Jan. 5 incident plunged Boeing into a new crisis five years after the second of two fatal crashes grounded the MAX.
Regulators have begun to rein in Boeing’s already lagging production. Airlines scrambled to adapt their schedules to the ongoing delays, which meant fewer planes available for delivery.
Boeing has struggled to convince customers it can overcome scrutiny, especially after safety board reports that focused on weaknesses in the production chain.
The catalytic moment came last week, when executives from major U.S. MAX customers Southwest, United, Alaska and American demanded a meeting with the board to express frustration over the lack of progress, the people said. Boeing Chairman Larry Kellner suggested organizing bilateral meetings instead.
But over the weekend, Boeing’s board of directors preempted that action by agreeing to the phased departures of Calhoun, Kellner and aircraft CEO Stan Deal, whose post will go to Chief Operating Officer Stephanie Pope. A senior industry source described the shake-up as Boeing management being “fired by customers.”
Insiders said it was the broadest purge at the top level since CEO Phil Condit resigned days after the company’s chief financial officer was fired in the wake of a 2003 defense contracting scandal.
“The US carriers were determined to achieve regime change,” said a source familiar with the discussions.
“OFF STAGE”
Some say Calhoun, who said the move was his decision, jumped before he was pushed and agreed to leave before the end of the year.
But pressure from industry and regulators had been building for weeks and came to a head when new weak bolts were discovered in late January.
United CEO Scott Kirby (NYSE:) announced he will no longer wait for the delayed MAX 10, Boeing’s best hope to counter Airbus’ popular A321neo in the busiest part of the market.
“The Max 9 grounding was probably the straw that broke the camel’s back for us,” Kirby told CNBC.
Kirby immediately flew to France to begin negotiations with Airbus, with rival Boeing hoping to win a deal for 200 aircraft.
Alaska Airlines CEO Ben Minicucci, who is said to have played a particularly active role in pressuring Boeing, told NBC: “It makes me angry. Boeing is better than this.”
Such conversations often take place in private.
Industry unity has been shaken since MAX bans following crashes in 2018 and 2019 led to lawsuits over delays.
But the intensity of the intervention this month surprised observers in the boardroom and demonstrated fragile confidence in Boeing’s once strong grip on safety and reliability.
“The dynamics between supplier and customer in Boeing’s case have gone beyond the extremes that anyone has seen,” said independent aviation consultant Dick Forsberg, who helped found one of the largest aircraft leasing firms, Dublin-based Avolon.
Another person familiar with the negotiations said the major U.S. airlines – with the exception of Delta, which has publicly stayed away from the dispute – have decided to remove Boeing leaders “from the scene.”
The plan gained momentum at the Airlines for America meeting this month, sources told Reuters, confirming The Air Current’s report of a coordinated effort among the airlines.
During the meeting, executives met privately with National Transportation Safety Board Chair Jennifer Homendy. After her departure, executives including Kirby said it was time to set up a meeting with Boeing’s board, the people said.
Carrier
While airline executives have gone public, powerful leasing firms that own half the world’s fleet have intervened more cautiously.
At the annual summit in Dublin in January, Landlords publicly backed Calhoun, but delegates were privately critical and predicted it would be weeks before Calhoun was removed.
A notable exception was low-cost airline Ryanair CEO Michael O’Leary, who defended Calhoun by targeting Boeing’s Seattle unit, where the 737 is built.
Crisis experts acknowledge that under Calhoun, Boeing has abandoned the unpopular legalistic tone adopted after previous MAX crashes and publicly acknowledged its mistakes. However, he has repeatedly insisted that current management will make the “deep changes” demanded by US regulators.
Experts say the carrier’s takeover will be studied for years as the dust settles.
“The commercial aviation base is up in arms. I can’t remember when this has ever happened,” said Jeffrey Sonnenfeld, Lester Crown Professor of Management Practice at the Yale School of Management.
“It’s career-ending if all your clients say they don’t trust you and want to go to your boss,” he said, adding that such collective action is rare in any industry.
Boeing is not alone in facing the effects of the pandemic. Airbus is delaying deliveries due to a lack of parts, and insiders say quality reports are exceeding target. The Pratt & Whitney engine company had many known problems.
But airlines say falling morale and high employee turnover at Boeing plants since the pandemic have clouded production and planning processes that will take years to correct.
Airlines insist the planes are safe after previous MAX crashes led to cabin changes and tighter oversight around the world.
But with some passengers now researching aircraft models before buying tickets, airlines say more needs to be done to reassure the public.
“What’s really needed here is someone with a strong engineering background, patience, interest and a penchant for getting into the details of what’s going on in manufacturing,” Rovinescu said of Boeing’s next CEO.