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.