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Boeing: Management Shakeup May Foster More Change—No Simple Task

New leadership will likely increase the probability that the firm can dig itself out of its mess and deliver high-quality planes on schedule again.

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We greet news of the management shakeup at Boeing with resigned exhaustion. While the changes do not alter our $219 fair value estimate, new leadership will likely increase the probability that the firm can dig itself out of its mess and deliver high-quality planes on schedule again.

We see the resignation of CEO David Calhoun, effective at the end of 2024, and the immediate retirement of Stan Deal, who headed Boeing’s now-beleaguered commercial airplanes unit since 2019, as ultimately necessary to clear a path forward. For key stakeholders—including customers, investors, directors, and likely the machinists’ union—they became too closely associated with the successive manufacturing flaws seen in the 737 MAX and 787 lineups since 2019 for their leadership to survive.

Whoever replaces Deal as head of the commercial business has a tough road ahead. Until January 2024, Stephanie Pope ran Boeing’s aircraft services business, which consistently printed double-digit profit margins while other units faltered. However, delivering consistent profits is not the skillset most immediately needed at the top of Boeing. The new head will have to work with the many teams that build the planes, the regulators and customers who verify that the company follows its prescribed safety and quality procedures, and eventually Boeing’s many suppliers to reliably ramp up production to flawlessly deliver hundreds of back-ordered jets.

When Pope was named COO in January, many interpreted this as commensurate to being named the CEO heir apparent. While such a promotion may still be in the cards, in our view, Pope has some nine months to instill meaningful behavioral changes in the commercial aircraft unit that eluded her predecessors for nearly five years.

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The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Nicolas Owens

Equity Analyst
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Nicolas Owens is an industrials equity analyst for Morningstar Research Services, LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the aerospace and defense sector, including Boeing, Airbus, and major North American commercial airlines and defense contractors.

Owens previously covered the aerospace sector for Morningstar from 2002-05. Since then, he filled a range of business roles commercializing Morningstar research across a wide swath of the investment audience.

Owens holds a bachelor's degree in politics from Princeton University. He also holds a Master of Business Administration in finance and strategic management from the University of Chicago Booth School of Business.

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