Boeing’s New Pilot Has the Turnaround Job of the Decade

Ortberg has beaten two other well-positioned candidates to the top job. One was Pat Shanahan, CEO of aerostructures supplier Spirit AeroSystems, which Boeing has agreed to purchase. The other contender was the plane maker’s own head of commercial aircraft, Stephanie Pope.

The decision to hire a true outsider seems wise. Calhoun’s attempts to pull the company out of its nosedive since the 2019 grounding of the 737 MAX were always compromised by his long stint as a director. Continuing production snafus on his watch, particularly the blowout of a door plug during an Alaska Airlines flight this January, further dented the confidence of investors and, even more important, of airlines and lessors.

On Wednesday, Calhoun told Wall Street analysts that he doesn’t expect Ortberg to undertake a big shake-up of senior management. “I don’t think he’s coming in with a notion of wanting to change a lot of folks,” he said. “He knows full well we are in a recovery mode.”

Still, signaling a fresh start should be a priority for the incoming boss. A reluctance to raise problems with management appears to be part of Boeing’s culture. Changing it will need clear signals from the very top.

Building planes that don’t fall apart is just the first step toward regaining ground lost to European rival Airbus in recent years. Boeing’s long-term future will depend on the launch of groundbreaking new aircraft, notably a “clean sheet” narrow-body jet to replace the 737 in the 2030s. The company needs to revive the culture of innovation and dialogue with customers that made the 777 program a roaring success in the 1990s—all while integrating Spirit and grappling with supply shortages.

On paper at least, Ortberg has the credentials, including in-depth engineering and supply-chain knowledge. Until not long ago, he was one of the aviation industry’s rising stars: Having joined Iowa-based avionics manufacturer Rockwell Collins in 1987, he became its president and CEO in 2013. He undertook some big acquisitions and gained a reputation as a likable leader who frequented the factory floor, and accumulated experience dealing with regulators and the Pentagon. Rockwell was known for being an innovative firm, as opposed to the more procedure-focused United Technologies Corp. that bought it in 2018.

UTC combined Rockwell with its other aerospace division to form Collins Aerospace, and in 2020 merged with Raytheon to become RTX Corp. Ortberg left in 2021, just as he was touted by some as a potential successor to former CEO Greg Hayes, who retired this May. Now, he will finally get a shot at leading an aerospace giant, albeit a troubled one.

Supply snags are turning this into a bad year for Airbus, too. On Tuesday, having already pushed back its delivery targets for 2024, it posted a 78% drop in second-quarter earnings compared with a year earlier.

The big difference is that Airbus hasn’t had to load itself up with debt to ride through the storm. With Boeing’s latest $10 billion bond issuance, its long-term debt at the end of June added up to $53.2 billion. This equals 37% of the company’s total assets, when at the start of 2019, it was 9%. Airbus’s current ratio is 8%. 

Admittedly, this debt pile could be quickly reduced if Boeing meets its production targets, or if it manages to run down its huge $86 billion inventory, which has swelled because of undelivered jets and the plane maker’s attempts to support its parts suppliers. It comes as a relief for investors that the company is for now sticking to its target to make 38 MAX aircraft a month by year-end. But any production goals are precarious in the industry’s current state. 

As much as Ortberg looks like the right person to right Boeing’s course, the financial legacy of a tumultuous half decade will weigh heavily.

Write to Jon Sindreu at jon.sindreu@wsj.com