Boeing ousts its CEO after two deadly 737 Max crashes
January 2, 2020 | By Cathy Bussewitz And David Koenig
NEW YORK – Boeing ousted CEO Dennis Muilenburg on Monday with no end in sight to the crisis that has engulfed the vaunted American aircraft manufacturer since the crash of two of its 737 Max airliners.
The Boeing board had supported Muilenburg for months despite calls for his resignation from lawmakers and relatives of the passengers killed. When it became clear in recent days that federal regulators would not certify the grounded Max to fly again by year’s end as Muilenburg had hoped, the board finally abandoned him.
Board members decided to remove him on a conference call Sunday, according to a person familiar with the events who discussed the private deliberations on condition of anonymity.
The move came after another bad week for Boeing. The aerospace giant had announced it would temporarily halt production of the Max because it wasn’t clear when it could deliver the planes. And Boeing’s new Starliner space capsule went off course during a bungled, unmanned test flight to the International Space Station.
The company said Muilenburg departed immediately and its current chairman, David Calhoun, will take over as CEO on Jan. 13.
Boeing said it decided it needed new leadership to regain the confidence of regulators. The company – which has been criticized over the design of the Max, Boeing’s failure to tell pilots about a new flight-control system on the plane, and its handling of the crisis after the first crash – promised a “renewed commitment to full transparency.”
Boeing declined to make Calhoun or other executives available for comment.
Muilenburg had been CEO since mid-2015. The company’s stock soared during most of his tenure, as Boeing benefited from strong demand for new planes to meet the growing demand for travel around the world, although the shares have fallen 24% since peaking just before the second crash.
Boeing began designing the Max in 2011 to compete with a new plane from Airbus that was cutting into sales of Boeing’s venerable 737. Critics, including members of Congress, say that Boeing, with the Federal Aviation Administration’s help, rushed the plane into production and minimized safety risks.
In October 2018, a brand-new Max operated by Indonesia’s Lion Air crashed into the sea near Jakarta. Five months later, in March, an Ethiopian Airlines Max went down shortly after takeoff from Addis Ababa. All 346 people aboard the two planes were killed.
Muilenburg was faulted for Boeing’s initial response to the accidents, when he and the company seemed to blame the foreign pilots. Criticism of Muilenburg grew in recent months as news reports and congressional investigations disclosed internal Boeing documents that revealed concern within the company about key design features on the Max, especially the new automated MCAS flight-control system that investigators say played a role in the two crashes.
A faulty sensor caused the system to activate before the two disasters, pushing down the nose of both planes. Boeing had not told pilots about MCAS until after the Lion Air crash, and regulators at the FAA didn’t know much about it either.
Earlier this month, the House Transportation Committee disclosed an internal FAA analysis made after the first crash, which estimated that there would be 15 more fatal crashes over 45 years until Boeing fixed MCAS. Yet the FAA did not ground the plane until the second crash.
Ababu Amha, who lost his wife, a flight attendant, in the Ethiopian Airlines crash, welcomed Muilenburg’s departure.
“This is something that we have been asking and struggling for quite some time,” he said. “The CEO reluctantly and deliberately kept the aircraft in service after the Lion Air crash. The Ethiopian Airlines crash was a preventable accident.” He added: “What they did was a crime.”
Democratic Rep. Peter DeFazio of Oregon, chairman of the House Transportation Committee, said the CEO’s ouster was long overdue.
“Under his watch, a long-admired company made a number of devastating decisions that suggest profit took priority over safety,” DeFazio said. “Furthermore, reports that Muilenburg attempted to pressure FAA into rushing the Max back into service are highly troubling.”
FAA Administrator Stephen Dickson expressed concern this month that Boeing was pushing for an unrealistically quick return of the Max.
The worldwide grounding of the Max in the wake of the two crashes has undercut orders and deliveries of new planes and caused Boeing to burn cash. With Boeing in turmoil, European rival Airbus has surged far ahead of the Chicago-based company this year.
The shutdown in Max production is likely to ripple through the Pacific Northwest and Boeing’s vast network of 900 companies that make engines, bodies and other parts for the plane.
The Max debacle has put the spotlight on Boeing’s culture, which some current and former employees say changed from one driven by engineering to a top-down management system in which containing costs and maximizing profit – and driving the stock price higher – became an obsession.
Peter Lemme, an engineer at Boeing for 16 years before leaving in 1997, said the shift began more than two decades ago, culminating with the 1997 acquisition of McDonnell Douglas.
“It was really the Douglas management that infiltrated the Boeing philosophy,” Lemme said.
Pilot unions, still seething over being kept in the dark about MCAS, said they want more openness from the new Boeing leadership.
“It’s the perfect time to step back from the spreadsheet and focus on the reason airplanes fly, and that’s to safely carry human beings around the globe,” said Dennis Tajer, a 737 pilot and spokesman for the pilots union at American Airlines.
Boeing stock gained 2.9% following the news of Muilenburg’s departure.
Muilenburg was eligible for $39 million in cash severance, stock and bonuses based on Boeing’s stock price of $322.50 at the end of last year, according to a Boeing securities filing. The stock closed Monday at $337.55.
Analysts said it was unclear whether the change in CEOs will make any difference in how quickly Boeing can win approval to get the Max flying again.
The grounding has led airlines around the world to cancel tens of thousands of flights. In the U.S., Southwest has been hit the hardest; its pilots union is suing Boeing. Without the planes, airlines had to scale back on plans for more flying.
Boeing has estimated it will spend at least $9 billion to compensate airlines and adjust the Max production schedule. Analysts suspect that figure will go much higher.
Many analysts believe that when the Max is allowed to fly again, the sudden increase in planes and seats will cause fares to dip.
To rebuild trust, Boeing has to repair its relationship with the FAA and other authorities and must be transparent with the travelling public, said Mark Dombroff, an aviation expert and partner with the law firm Fox Rothschild.
“I’ve heard it said that ‘If it ain’t Boeing, I ain’t going,”’ Dombroff said. “I think that’s something Boeing’s taken great pride in, in my view justifiably, and I think they can get there again if they address these priorities.”
Replacing Muilenburg will help Boeing distance itself from some of the problems, he added. “Mr. Muilenburg had become, rightly or wrongly, something of a lightning rod for controversy,” Dombroff said.
Calhoun, 62, formerly ran General Electric’s jet-engine business and later was CEO of Nielsen, the television-ratings company. He has been a Boeing board member since 2009 and became chairman in October, when the board stripped Muilenburg of that title.
As for whether passengers will feel comfortable flying the Max, that remains to be seen.
“As long as they figured out what caused the crashes and they can solve that, then I’m fine with that, I guess,” Southwest passenger Troy Brasher said at the Oakland, California, airport.