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FOCUS-How Boeing's leadership was 'fired' by its own customers
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FOCUS-How Boeing's leadership was 'fired' by its own customers
Mar 27, 2024 10:33 AM

March 27 (Reuters) - It took 80 days. But for the

airline industry, enough was enough.

A revolt by U.S. airline bosses helped topple Boeing's ( BA )

top leadership including CEO Dave Calhoun this week,

capping weeks of pressure after the freakish Jan. 5 blowout of a

door plug on an Alaska Airlines 737 MAX 9 passenger jet,

people familiar with the discussions said.

With the company's major U.S. customers agitating for a

boardroom meeting without Calhoun, Boeing's ( BA ) board pre-empted

their demands with a major upheaval.

Now, after the shakeup that took out the CEO, chairman and

head of Boeing's ( BA ) commercial airplanes business, airlines face

prolonged uncertainty over jet supplies and are calling for

deeper changes - starting with picking a manufacturing

heavyweight as CEO.

"It wouldn't surprise me that people said, 'What exactly is

the Boeing ( BA ) strategy to change this, not put a Band-Aid on it,'"

former Air Canada CEO Calin Rovinescu told Reuters.

"There's a point at which you cannot pretend that everything

is fine. And I think this has been the call to action that you

probably heard from the airline community."

Boeing ( BA ) said it had nothing to add to comments from

Calhoun, who told employees on Monday that he had been

considering stepping down as CEO for some time. He added that

the company would "fix what isn't working, and we are going to

get our company back on the track towards recovery and

stability."

The Jan. 5 incident plunged Boeing ( BA ) into a new crisis five

years after the second of two fatal crashes grounded the MAX.

Regulators began curbing Boeing's ( BA ) already lagging

production. Airlines strained to adapt their schedules to the

ongoing delays that meant fewer planes available for delivery.

Boeing ( BA ) struggled to convince customers it would be able to

overcome the heavy scrutiny, particularly following safety board

reports that focused on weaknesses in the production chain.

The catalyzing moment was last week, when CEOs of major U.S.

MAX customers Southwest ( LUV ), United, Alaska

and American demanded to meet the board to express

frustration at a lack of progress, sources said. Boeing ( BA ) Chairman

Larry Kellner offered to set up bilateral meetings instead.

But over the weekend, Boeing's ( BA ) board pre-empted that action

- agreeing to staggered departures of Calhoun, Kellner and

planemaking CEO Stan Deal, whose post went to chief operating

officer Stephanie Pope. A senior industry source described the

shakeup as Boeing ( BA ) management being "fired by its customers."

Insiders noted it was the broadest top-level clear-out since

CEO Phil Condit resigned days after the company's finance

director was fired in a defense-contract scandal in 2003.

"The U.S. carriers were determined to force regime change,"

said a source familiar with the discussions.

'OFF THE STAGE'

Some said Calhoun, who claimed the move was his decision,

jumped before he was pushed, agreeing to leave by year-end.

But pressure from the industry and regulators had been

growing for weeks, and boiled over when more loose bolts were

found in late January.

United CEO Scott Kirby announced it would no longer wait for

the delayed MAX 10, Boeing's ( BA ) best hope of countering Airbus'

hot-selling A321neo in the busiest part of the market.

"The Max 9 grounding is probably the straw that broke the

camel's back for us," Kirby told CNBC.

Kirby promptly flew to France to start talks with Airbus

, with Boeing's ( BA ) rival hoping to win a 200-plane deal.

Alaska Airlines CEO Ben Minicucci, who is said to have

played a particularly active role in pressuring Boeing ( BA ), told

NBC: "It makes me angry. Boeing ( BA ) is better than this."

Such conversations more typically take place in private.

Industry unity had cracked after the MAX groundings that

followed crashes in 2018 and 2019 led to lawsuits over delays.

But the intensity of this month's intervention astonished

boardroom observers and demonstrated the fragile confidence in

Boeing's ( BA ) once-sure grip on safety and reliability issues.

"The dynamic between supplier and customer in the case of

Boeing ( BA ) has gone beyond extremes anyone has seen," said

independent aviation adviser Dick Forsberg, who helped found one

of the largest aircraft leasing firms, Dublin-based Avolon.

Another person familiar with the talks said major U.S.

airlines - apart from Delta, which publicly stayed out of the

fray - had resolved to get Boeing ( BA ) leaders "off the stage."

The plan gathered speed at an Airlines for America meeting

this month, sources told Reuters, confirming a report on the

coordinated airline action by The Air Current.

During the meeting, the CEOs met privately with U.S.

National Transportation Safety Board chair Jennifer Homendy.

After she departed, the CEOs including Kirby said it was time to

seek a meeting with the Boeing ( BA ) board, the sources said.

CARRIER COUP

While airline bosses went public, the powerful leasing firms

who own half the world fleet waded in more discreetly.

At an annual Dublin summit in January, lessors publicly

backed Calhoun but delegates were critical in private and

predicted it would be weeks before Calhoun was ousted.

A notable exception was budget airline Ryanair CEO

Michael O'Leary, who defended Calhoun while taking aim at the

Boeing ( BA ) division in Seattle where the 737 is built.

Crisis experts acknowledge that under Calhoun, Boeing ( BA )

abandoned the unpopular, legalistic tone it adopted after

earlier MAX crashes, publicly admitting to mistakes. That said,

he repeatedly insisted that the current management would usher

through the "profound changes" demanded by U.S. regulators.

As the dust settles, experts say the carrier coup will be

studied for years.

"The commercial aviation base rebelled. I can't think of

when that's ever happened," said Jeffrey Sonnenfeld, Lester

Crown Professor in management practice at Yale School of

Management.

"It's career-ending if all of your customers said they don't

have confidence in you, and wanted to go to your superiors," he

said, adding such collective action was rare in any industry.

Boeing ( BA ) is not alone in facing post-pandemic disruption.

Airbus is delaying deliveries due to missing parts and insiders

say the volume of quality reports is above target. Engine firm

Pratt & Whitney has had a slew of publicized problems.

But airlines say the slump in morale and high turnover in

Boeing ( BA ) factories since the pandemic have cast a pall over the

production and planning process that will take years to fix.

Airlines insist planes are safe after the earlier MAX

crashes led to cockpit changes and a worldwide increase in

oversight.

But with some passengers now researching plane models before

buying tickets, airlines say more needs to be done to reassure

the public.

"What is needed here is indeed someone who has a strong

engineering background, who has the patience, the interest, and

the disposition to get into the details of what goes on on the

manufacturing floor," Rovinescu said of the next Boeing ( BA ) CEO.

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