With a long list of to-dos ahead, Boeing’s (BA) incoming CEO, Kelly Ortberg, is diving headfirst into a sea of challenges starting next week. Ortberg, who’s re-emerging from retirement to lead the 108-year-old aerospace giant, is set to tackle a slew of issues that have left Boeing reeling.
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Restoring Relationships
Ortberg’s mission is clear: mend fences with both airlines and employees. Boeing has been grappling with a decline in jet production and delivery, causing major headaches for clients like Southwest Airlines, which now expects only 20 of the 85 jets it had planned for 2024. Bill George, former Medtronic CEO, told Reuters the gravity of the situation: “This is not a five-year fix-it. Is he prepared to spend the 10 years it’s going to take to restore Boeing?”
BA’s Financial Fixes and Production Hurdles
Ortberg also faces the urgent task of reversing Boeing’s financial woes. The company is currently burning cash due to lower-than-expected production rates and ongoing costs associated with unused parts. Tony Bancroft from Gabelli Funds points out that with production rates below optimal levels, “it’s just going to burn cash.” Meanwhile, S&P warns that Boeing could face a downgrade to junk status if it doesn’t step up its production game.
Boeing’s Safety and Legal Issues
On the safety front, whistleblower Sam Salehpour accused Boeing of taking shortcuts in manufacturing its 777 and 787 Dreamliners. According to The New York Times, these shortcuts could jeopardize the aircraft’s lifespan. Boeing has responded by asserting that its planes are safe and that Salehpour’s claims are inaccurate.
Looking Ahead
Ortberg’s new role will not only involve financial and production adjustments but also mending Boeing’s tarnished reputation. As he prepares to tackle these monumental tasks, his choice to base himself in Seattle might signal a renewed focus on the heart of Boeing’s operations, even though the company’s headquarters remains in Virginia.
Is Boeing a Buy?
Analysts remain cautiously optimistic about BA stock, with a Moderate Buy consensus rating based on 15 Buys, four Holds and 1 Sell. Over the past year, BA has decreased by more than 25%, and the average BA price target of $218.74 implies an upside potential of 29.7% from current levels.
