McAllister out, a new Deal at Boeing Commercial Airplanes

By Scott Hamilton

Analysis

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.

Kevin McAllister, left, and Stan Deal, right, at an order signing. McAllister is out and Deal is in. Credit: Azal.az.

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.

Late to the party

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.

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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.

Other reasons

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.

  • Sales of the 787 are lagging. Boeing has a huge production gap beginning in 2022. Boeing is burning through the 787 backlog at production rate 14 and there just aren’t the sales to sustain the rate.
  • The 777X program is in trouble. Sales stalled and cancellations are likely. The 777-8 has been delayed two years.
  • The 787 line in Charleston and the KC-46 line in Everett have foreign object and quality control issues. (Boeing Commercial produces the KC-46 and installs the military hardware.)

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

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.

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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.

 

 

9 Comments on “McAllister out, a new Deal at Boeing Commercial Airplanes

  1. Kevin McAllistar joined Boeing in 2016, 10 months after 737 MAX first flight. Replacing a guy that didn’t fit in anyway. A scapegoat? Maybe..

    Not restoring confidence for me. Fully addressing the JATR report, that what many are waiting for.

  2. Maybe he quit — out of disgust and frustration — rather than being fired…who knows?
    If he’s intended to be a sacrificial lamb, then that probably won’t work: at most, he’s (partially) responsible for the inadequate RESPONSE to the MAX fiasco…but the real rot lies with the people who CAUSED the fiasco. And that rot is still in the Boeing woodwork.

  3. This shambles deserves more senior sacrifices than this. The whole strategic direction of the company needs refocusing and the rank and file need belief that things will change. Something is truly rotten in the borough of Seattle/ Chicago.

    The whole senior team plus deadwood NEDs need to go. If the challenge is not grasped soon there will be nothing left. It will take a number of years to bring Boeing back to the trusted market leader it has always purported to be.

  4. Kevin McAllistar should have had staff carefully calculating the damage each Airlines suffered with the 737MAX grounding and should have visited them with top management showing their calculations and together had come up with solutions alomst every month.
    Many airline CEO’s have big egos especeially gouverment owned Airlines where the CEO’s are potically protected and could have been asking for the moon.
    Still lease companies could have helped Boeing at customers setting the numbers right.
    Boeing could have been finding and leasing out 787/767’s to cover the longest 737MAX routes, helping them with good 737-800’s, 757/767’s or even A321’s making sure their operation could hum along and their fleet planning being minimum disrupted.
    Now the Return to Serivce date has been moved to the right a couple of times and there is a risk that Boeing has “promised” new dates over and over loosing the airliners executives thrust. Kevin was the responsible guy approving each promises and now it became the easiest solution to dump him instead of the ones who actually were responsible that Boeings staff followed old procedures to the letter. The lights then points to 737MAX cheif Project manager and cheif Engineer at the times of test flying.

  5. But where is the smell coming from? As Boeing is unlikely to have learned much that they didn’t already know from the second crash, my guess is that most of it comes from the period between the crashes. Of course its ongoing,with constant attempts to smear the flight crew still going on.

  6. The GE-Welch-MDC virus runs deep- way too deep. How long before at least two people on the Boeing Board recognize that following the GE MDC lemmings off the cliff is not going to help

  7. Maybe 787 sales are what is there to be had?

    Was it Mighty Mac who sold the rate increase?

    It looks like a downturn in aviation and the 787 issue is just related to what the long term wisdom was, slow it down don’t increase it.

    It should have gone to rate 10 and I believe long term, rate 8.

    I don’t see major A330/A350 sales that are true contests either

    • I know what you are saying re A330 sales but effectively one more A330 is going to be one less B787 in today’s market

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