Boeing’s Board of Directors took action in stripping Boeing CEO Dennis Muilenburg of his Chairmanship, appointing non-executive director David Calhoun as its new Chairman. Calhoun has experience in facing challenges, and his appointment was positively viewed by Boeing’s customers.
In the announcement, Boeing indicated that it wanted Muilenburg to focus on getting the 737 MAX back into service as the aircraft grounding enters its eighth month. Boeing has still not submitted its final fix for the flight control software to the FAA and has missed its initial target of late September to early October. It is now expected that the FAA will require at least a month for its review. Given airline logistics to return aircraft to service, it is highly likely that the MAX will not re-enter service until early 2020 in the best possible case.
The key question is whether the demotion for Muilenburg is a precursor to a management change. The industry rumor mill indicates that this may hinge on the return to service of the 737 MAX, which still has no light showing at the end of the tunnel. Boeing has been working on a solution to the flight control systems and MCAS problems since the Lion Air crash, but is still not ready to present it to the FAA.
Interestingly, Muilenburg, CEO of Boeing Corporate, rather than Kevin McAllister, CEO of Boeing Commercial Airplanes, has been the public figure during the aftermath of the crashes. With Muilenburg in Chicago, and further from key 737 operations in Seattle, his more detached relationship comes across as somewhat insincere, and he may not be the most appropriate individual to be the public face of Boeing during this crisis. Muilenburg’s lobbying with Donald Trump not to ground the MAX in the wake of the two accidents has negatively impacted the public perception of Boeing.
McAllister has been dealing with customers behind the scenes, but has had virtually no visibility to the public after the crashes. His silence is deafening as Boeing’s crisis management has not been as forthcoming as it should be, while investigative reporters uncover problem after problem. With Muilenburg being the spokesperson for Boeing, the company has not appeared in a positive light.
Can Muilenburg survive this crisis? We don’t believe he should, but it will depend on how quickly the MAX returns to service. We’re sticking with our 2Q 2020 estimate, which may be too long for the Board, especially if layoffs result from the inability to keep production going during the extended grounding. The “undue pressure” for getting the MAX back into service is now squarely on Muilenburg.