Oct. 24, 2022, © Leeham News: The question to Boeing CEO David Calhoun was put in levity. His response was telling.
Susanne Clark, the president of the US Chamber of Commerce, noted before last month’s Aerospace Summit that Calhoun assumed the CEO position in January 2020.
“It’s been a long 10 years,” she postulated.
“Yes, it’s been a long 20 years,” Calhoun replied.
These two sentences couldn’t describe the situation at Boeing more clearly.
Although Calhoun had been on the Board of Directors since 2009, including serving as lead director, the challenges he faced with the 737 MAX grounding were greater than he expected. Two months after becoming CEO, the COVID-19 pandemic erupted. And seven months later, deliveries of the 787 were suspended.
The MAX and 787 issues went on much longer than anyone expected. (The MAX challenges still aren’t over.) Recovery from the pandemic is going better than forecast.
The Chamber’s Aerospace Summit was an in-person event. The previous one was in March 2020.
“I never imagined exactly what was going to happen post-January 2020,” Calhoun told the Summit. “We had an issue to deal with. I refer to it as a bit of an existential crisis. Most people think that when I say that they use economic terms. Yes, Boeing will borrow a lot of money and they’ll do this and do that. With no MAXes, how do we survive?
“For me, the crisis was the confidence of the flying public. We went through a very rough period post-Ethiopia,” he said, referring to the March 2019 MAX crash that led to the grounding of the global fleet. There were a lot of changes Boeing had to make, many of which were significant. “But the big question amongst investors and even in some of our own people was, how to get the flying public back on the airplane.”
When regulators across the globe grounded the nearly 400 MAXes then in service, few believed the grounding would last more than two or three months. Boeing reduced production from 52 MAXes a month to about 47. By the end of 2019, Boeing built 450 737s, storing them in Washington State, Texas, and California. But there was no end in sight when the Federal Aviation Administration would recertify the airplane. Dennis Muilenburg, the CEO when the MAX crisis began, was fired in December. Calhoun was named the new CEO, but he didn’t take office until January as he unwound other business commitments.
One of Calhoun’s priorities was to improve relations with the FAA, which had fractured under Muilenburg. Two months into his job, the pandemic began, which complicated the work to fix the MAX and work with the FAA to recertify the plane. It would take until November 2020 to do so.
“We were patient. I think we took the appropriate amount of time with our regulator to prepare our approach and to give it time to go through its own discovery,” Calhoun told the Summit. (In reality, Boeing had no choice but to give the FAA all the time in the world.) “It would be unfair to keep pressing for a certification every next three months because that’s what got us in trouble in the first place. We put a one-year timeline in place. We both worked diligently on getting from here to there.”
Since recertification, Boeing delivered about half of the stored inventory of 450 parked airplanes. But delivery has been slower than expected. So has resuming production rates. Boeing hoped to be producing more than 40 MAXes a month by now. It’s hard-pressed to produce 31 a month, a target reached early this year.
Returning those 400 MAXes that were grounded to service and delivering the 450 stored aircraft were high priorities. But then, COVID happened.
“While I know most people will talk about COVID as the big moment, we were already in the big moment, and then we had another one,” Calhoun said. With little history to draw from, Boeing and others in aviation forecast that it would take until 2024 to return to normal.
But US domestic and intra-European traffic came roaring back in 2022. International traffic lagged and China’s zero-COVID policy continues to suppress recovery there.
“It turns out the demand came back much faster, and the reason is vaccine development,” Calhoun said. But full recovery also has been inhibited by supply chain issues. Suppliers downsized dramatically to survive financially through the pandemic. Not all have. But as US employment rebounded, the worker pool isn’t as big as before the pandemic. Europe’s supply chain for Airbus (which also has a big US supply chain) saw similar challenges.
“Never could we forecast the supply chain issues that would become the constraint, and it is a constraint. I don’t think there’s a supplier, I don’t think there’s a company anywhere in our field, a customer that isn’t feeling some of the impact and the constraint of workforce shortages,” Calhoun said.