Boeing Hires New CEO

Wide-moat-rated Boeing BA announced Dec. 23 that David Calhoun has relinquished his board chairmanship and will become CEO in January 2020 as he exits his non-Boeing commitments at Blackstone. As this change in leadership does not affect our free cash flow assumptions, we are maintaining our $349 fair value estimate.

Calhoun has been on the Boeing board since 2009 and has led GE Aviation as well as Nielsen, a market research firm. While it could be argued that because Calhoun has been with Boeing for the entirety of the MAX’s history, he may be too close to the ensuing crisis, we think that his clear understanding of the aviation industry is the paramount qualification for this job. We do not anticipate a material departure from Boeing's shareholder-friendly policies, which we believe are in line with the company’s stated aspiration of being "best in aerospace and [an] enduring global industrial champion."

The obvious challenge Calhoun will need to face is the continued grounding of the 737 MAX. In the press release, Boeing stressed a renewed commitment to full transparency regarding the matter. Our hope is that this commitment manifests itself in a detailed communication of the progress that has been made on the 737 MAX’s pathway to return to service. While the milestones that Boeing must complete have been disclosed, we would appreciate a specific analysis of the progress toward achieving the remaining milestones and of the work being done with regulators to ensure passenger safety. Former CEO Dennis Muilenburg has also resigned from the board of directors. As regulatory matters remain critical to Boeing’s story, we think that a former member of an aviation regulatory agency would be a great choice for the board’s open position on the aerospace safety committee.

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