By Scott Hamilton
Oct. 23, 2019, © Leeham News: Kevin McAllister’s departure yesterday as CEO of Boeing Commercial Airplanes comes as no surprise.
Only the timing—now instead of next year, as was widely surmised—caught people off guard.
Reports conflict whether he resigned, was fired or (as one report put it), it was a “separation;” it really doesn’t matter.
Word was circulating for months, long before the 737 MAX grounding, that his was a fading star.
He was replaced by Stan Deal, CEO of Boeing Global Services.
That McAllister is the first high-profile casualty of the MAX grounding and recertification crisis is also not a surprise. That he would be sacrificed had been rumored for weeks. The New York Times openly wrote about this prospect 10 days ago.
But tying McAllister to the MAX crisis is to some degree scapegoating.
As I wrote Oct. 7, the fingers of blame for the crisis point much higher than McAllister.
McAllister was hired three years ago, in November 2016. The first flight of the MAX occurred the preceding January. Entry-into-service was March 2017.
What happened in the development of the MAX, MCAS and the time and financial pressures that have been revealed since this past March were already cast by the time McAllister got to Boeing.
But by all accounts, including those heard by LNA from the customer base, was that McAllister was MIA when it came to customer relations in the wake of the grounding.
This undoubtedly is too extreme a characterization, but clearly customers weren’t happy at the lack of McAllister’s involvement.
Boeing corporate communications, when asked about McAllister’s absence from the public scene, said he was focused on customer relations and returning the 737 to service.
Instead of a quick RTS, the grounding has dragged on and on. Now, best case, seems to be a December recertification by the FAA. Europe’s EASA already has said it will be January at the earliest before it’s ready to recertify the MAX.
Actual RTS would follow by 30-45 days, as pilots are trained on the MCAS fix.
The revelations about just how badly the FAA and Boeing followed or ignored procedures in the oversight and certification mostly pre-date McAllister’s appointment as CEO.
How he’s handled customer relations and whatever his involvement with the regulators certainly may have been enough to cashier him.
But the MAX crisis overshadowed other troubles that clearly fell under McAllister’s watch. We first wrote about this July 29.
The Seattle Times quoted an unidentified Boeing executive as laying the 737NG Pickle Fork problem (LNA, Oct. 1, 2019) at McAllister’s feet.
This is pure scapegoating. These airplanes were built a decade ago.
Also laid at McAllister’s feet: the engine troubles affecting the 777X. This, too, is scapegoating. GE makes the engines, not Boeing.
McAllister isn’t the chief salesman—this falls to Ihssane Mounir. But McAllister is CEO and when Ray Conner, Jim Albaugh and Scott Carson (McAllister’s three immediate predecessors) were BCA CEO, they were also out there meeting with customers and closing deals. The market says McAllister was not nearly as “out there” as his predecessors.
For these reasons, it could be argued there was enough reason already not to renew McAllister’s contract when it expired next month (or next year, the length is something of a moving target in the telling).
Stan Deal, the CEO of Boeing Global Services, was named McAllister’s successor.
Deal came to Boeing in 1997 with the merger of McDonnell Douglas Corp.
While many of the MDC transferees remain to this day looked upon by legacy Boeing people as pariahs, I’ve never heard anything but good about Deal.
Deal had a stint as head of sales in Asia. He worked as a leader in BCA’s supply chain management, where I first met him. He was picked by Muilenburg to be the first CEO of Boeing Global Services, which merged Boeing Commercial Aviation Services (CAS) and the Defense customer services into BGS two years ago.
He had a mandate from Muilenburg to grow the business to $50bn in revenue in 10 years, an ambitious (and some say, unrealistic) goal. Two years in, he was obviously well short but his profit margins were better than BCA’s.
Deal faces completing the MAX recertification and RTS. He faces customer compensation solutions, with Boeing’s opening offers drawing industry scorn. He faces resuscitating sales for the 787 and 777X and restarting sales of the MAX. He faces fixing QC issues in Everett and Charleston.
And he faces reviewing Boeing product strategy, which has been heading for trouble for years because it relies on derivatives and poor market strategy. The New Midmarket Airplane is McAllister’s baby. He’s gone and so, probably, is the NMA.
The question for Deal, then, becomes: what does Boeing do next?
It’s a great opportunity for Deal. But the sharks are in the water.