Boeing (NYSE:BA) has named Kelly Ortberg, former CEO of Rockwell Collins, as its new president and CEO, following the departure of Dave Calhoun. This leadership change comes at a challenging time for the aerospace giant, as it reported a wider-than-expected second-quarter loss and missed revenue expectations, raising concerns about its future financial stability.
Leadership Transition Amid Financial Struggles
On Wednesday, Boeing announced that Kelly Ortberg will take over as CEO on August 8, a decision that followed an extensive search process. According to Boeing chairman Steven Mollenkopf, Ortberg was chosen for his “right skills and experience to lead Boeing in its next chapter.” This leadership transition is occurring during a turbulent period for Boeing, with the company facing significant operational and financial challenges.
Boeing’s Q2 Earnings Disappoint
Boeing’s second-quarter earnings report revealed a revenue of $16.9 billion, falling short of the $17.46 billion estimated by analysts. More troubling was the adjusted loss per share, which came in at $2.90, far worse than the $1.82 per share loss that analysts had anticipated. The company’s core operating loss reached $1.392 billion, underscoring the depth of its current struggles.
The negative free cash flow also became a point of concern, with Boeing reporting a burn of $4.3 billion in the second quarter alone. This followed a nearly $4 billion cash burn in Q1, resulting in a staggering $8.256 billion in negative free cash flow for the first half of the year. On the earnings call, Boeing CFO Brian West warned of a “larger use of cash than previously forecast” for the remainder of the year, indicating that the financial pressure on Boeing is likely to continue.
Decline in Commercial Deliveries
Boeing’s commercial jet deliveries also took a hit in the second quarter. The company delivered 92 commercial jets, down 32% from the 136 planes delivered in the same period last year. The 737 Max program, once a cornerstone of Boeing’s commercial success, saw deliveries drop from 103 units in Q2 last year to just 70 this year. This decline reflects ongoing production and supply chain issues that have plagued the program.
Before its recent difficulties, Boeing had set a monthly production target of 38 737 MAX jets, with an ambitious goal of reaching 50 planes per month. Despite the setbacks, Boeing remains committed to achieving the 38-plane target by the end of the year. However, whether this goal is attainable given the current challenges remains uncertain.
Challenges with the Dreamliner
Boeing’s widebody Dreamliner program also faced difficulties in the second quarter. The company delivered only nine Dreamliner jets, a significant drop from the 20 delivered a year ago. The Dreamliner has been the subject of multiple whistleblower complaints in 2024, highlighting ongoing issues with Boeing’s production and assembly processes. In response, Boeing stated that it plans to return to producing five 787s per month.
Legal Troubles and Outlook
Adding to Boeing’s woes, the company recently pleaded guilty to a criminal fraud conspiracy charge and agreed to pay at least $243.6 million after violating a 2021 consent decree with the Department of Justice. The government alleged that Boeing continued risky procedures in plane construction and failed to maintain accurate records following the two 737 MAX crashes in 2019 and 2020. Families of the crash victims are challenging Boeing’s plea deal, potentially prolonging the company’s legal troubles.
Despite the disappointing quarter, outgoing CEO Dave Calhoun expressed optimism about Boeing’s future. “We are making substantial progress strengthening our quality management system and positioning our company for the future,” Calhoun said. He emphasized that Boeing is executing on a comprehensive safety and quality plan, including the acquisition of Spirit AeroSystems. However, Calhoun acknowledged that Boeing still has a long road ahead as it works to stabilize operations and rebuild trust with its stakeholders.
As Boeing navigates these turbulent times, the focus will be on how new CEO Kelly Ortberg steers the company through its ongoing challenges. Investors and industry analysts alike will be watching closely to see if Boeing can turn the corner and return to profitability.
Featured Image: Freepik