Boeing and Muilenburg: Turbulence Ahead

It is a time of turbulence and weathered storms for Boeing and CEO Dennis Muilenburg, but there’s no need to grab your parachute just yet!

All air travel puns aside, there are very few people who haven’t heard at least something about the world’s largest aircraft manufacturers problems in the past year.

Some folks have no issues with airplane travel, but for others it is a nerve-wracking experience.

How much worse must it be when the plane maker they trust, Boeing (NYSE:BA) has had two planes fall from the sky within 6 months of one another. Last October a Boeing MAX passenger jet crashed in Indonesia, and in March this year, another went down in Ethiopia with 346 lives.

Not only this, but the defensive nature of Boeing CEO Dennis Muilenburg in the wake of these disasters has not helped build customer trust back up. Since the plane was grounded in early 2019, there has been an obvious dip in both consumer and investor confidence, but the company has still stood strong. Its value has remained stable and it has even received orders for its improved 737 MAX jets since the grounding.

However, there is still a threat to their 2019 earnings in a recent report by industry data provider FlightGlobal, who have dropped their value of a brand new Boeing 737 MAX by 5% to $45.7 million per plane. This is more than half the price of the average MAX plane which normally lists for more than $100 million. Conversely, Boeing’s main competitor Airbus have had their A320 NEO jet listed at roughly $50 million.

At the June Paris air show, CEO of GE Capital Aviation Services Alec Burger pointed out that there has never been more competition in the narrow-body aircraft game, with over 150 serious competitors. To the ears of investors, along with the lower valuation of the 737 MAX, this does not make for stellar profit margins.

However, this is not a killer blow to Boeing, as despite the grounding and lower valuation, IAG –parent company of British Airways and Iberia — made their intentions known for an order of 200 737 MAX aircraft, which is a loud vote of confidence in the aircraft’s new safety features. Many of the issues following on from from these disasters stem from the handling of the situation by CEO Dennis Muilenburg. His belated apology to the families of the two disasters did not go down well, and morale at the company as well as from customers is low. It is now up to him to rebuild the trust the company has maintained for over a century.

Boeing is a long way away from our 3 companies that highlight the importance of good company culture.

The IAG deal has bought time for the company to maintain control, and the current share prices of the $210 billion giant imply that investors are still behind them. Going forward, the handling of the situation by upper management such as Muilenburg will dictate public image of Boeing. If the company is to come through this troubling time intact, their CEO needs to step up, or else they will need to find someone else who can.

The captain may go down with the ship in many cases, but the ship will not go down with its captain here.

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