U.S. aerospace giant Boeing named on Wednesday industry veteran Kelly Ortberg as its new president and CEO after a monthslong search, tasking the former Rockwell Collins executive with the monumental job of turning around the struggling planemaker.
Ortberg, 64, will start on Aug. 8 and face a multitude of issues, including reviving jet production and rebuilding trust with regulators, the industry and the flying public. Shares rose 2.9% before the bell.
Boeing, one of two global plane makers, has been mired in a reputational and safety crisis after a Jan. 5 midair panel blowout on an Alaska Airlines-operated Max 9 jet carrying 171 passengers. It posted a $1.4 billion loss in the second quarter as it continues to burn cash.
The accident eventually led to the resignation of CEO Dave Calhoun and the departure of the company's previous board president as regulators took aim at the safety culture that was already shaken by previous crashes in 2018 and 2019.
Shortly after the accident, the U.S. Federal Aviation Administration (FAA) barred Boeing from expanding production of its cash-cow 737 Max family of jets without estimating how long the limitation would last.
The U.S. aviation regulator capped production at 38 jets per month, though Reuters reported that Boeing had been producing jets at a much lower level for some weeks.
On Feb. 28, the regulator gave Boeing 90 days to develop a comprehensive plan to address "systemic quality-control issues," which the company submitted in May.
However, the FAA's administrator has said Boeing would not be immediately allowed to increase 737 Max production.
Analysts cheer appointment
"During his leadership at Collins, he was well liked by employees and direct reports and very personable," Jefferies analysts said in a note from earlier this week, after industry publication the Air Current reported Ortberg was a serious contender.
Jefferies said he was a "tough negotiator" dealing with diverse customers and suppliers.
A mechanical engineer, Ortberg has more than 30 years of experience in aerospace and defense, including numerous executive roles. After five years leading Rockwell Collins, he steered the company's integration with United Technologies and RTX until he retired from RTX in 2021.
He pipped Patrick Shanahan to one of the top industrial jobs after the former Spirit Aero CEO was seen as a favorite for succeeding Calhoun by some analysts and investors.
"There is much work to be done, and I'm looking forward to getting started," Ortberg said in a statement.
Defense business struggles
During the second quarter, Boeing delivered 92 aircraft, down 32% from last year. It posted a loss of $2.33 a share, as its troubled defense and space business exacerbated the financial strain on the company.
The Defense, Space, and Security unit, one of Boeing's three main businesses, lost billions of dollars in 2023 and 2022. Executives attributed this to cost overruns on fixed-price contracts.
Such contracts have high margins but leave defense contractors vulnerable to inflationary pressures that have dented U.S. corporate earnings in the last few years.
The planemaker used to bid aggressively for fixed-price contracts before the pandemic but has now said it would pivot away from such contracts to stem losses at the business, which amounted to $1.76 billion last year.
Ahead of last week's Farnborough Air Show, the unit's head had said it was "significantly challenged" during the quarter.
Boeing CFO Brian West said in May the planemaker will burn rather than generate cash in 2024, hamstrung by lower jet deliveries compared to last year.