So, the new CEO of aerospace firm Boeing (BA), Robert “Kelly” Ortberg, has been in place for just under a month now, and already, the results have been mixed. While United Airlines (UAL) CEO Scott Kirby was in favor, Ryanair (RYAAY) CEO Michael O’Leary found Ortberg’s tenure disappointing even in the early stages. That is, at best, a mixed bag, and with Boeing still operating under a federally-mandated production cap, it will make for a difficult time going forward. How can Robert Ortberg win back trust and get Boeing back on track?
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Thankfully, there are several clear paths to improvement here, if not necessarily victory. Not immediately, anyway. Boeing’s reputation was hard-won over the course of decades. It will not be reclaimed overnight. It was not so long ago, in fact, when some projected that Boeing might take decades to recover. With these key points, however, the path to recovery might be simpler.
Improve Production
With Michael O’Leary breathing down Ortberg’s neck to get his hands on ordered aircraft and a host of other airlines making orders that may not be fulfilled for years, perhaps the biggest thing to do is to get behind production. This might require an out-and-out expansion or at least hiring more workers.
A look at Boeing’s website reveals that nonexempt employees–who are most likely to be shift workers handling assembly tasks–are entitled to overtime pay for anything over 40 hours, with some differences in California. Further, Boeing also offers flexible hours, which means that theoretically, they could make a shift six hours long and add on an entire fourth shift. This would be costly, but it would ensure fresher workers.
Boeing’s current production cap imposed by the government does not help. It needs to be able to produce, but it also needs to be able to produce reliably. This might also be solved with a fourth shift; instead of working the current body of workers into a frenzy, bring in an entirely new shift to produce. More shifts–and more workers–will help keep workloads down along with mistakes due to fatigue.
Communicate Better
This will actually dovetail into the previous point well. It is all fine and well to make better planes and make them faster. However, if no one knows they’re being made, then what is the point? This is where Boeing needs its marketing department to move. Not only does Boeing need to make the better planes and get word out about them, it also needs to be visibly seen addressing problems as they arises. And that includes pointing out where future Boeing processes will prevent problems from happening.
By relentlessly addressing issues as they emerge, Boeing takes on a new image: the proactive, responsive business that is not afraid to admit it was wrong. Some might find this notion tedious, even tiresome. But overcommunicating is the key to leadership in times of crisis. That is actually a direct quote from Forbes, who published an article titled exactly this just four years ago. Though some may dispute the notion that Boeing is in crisis, others may find the assertion not completely out of line.
Focus on the Customer
One of the few positives in Boeing’s favor right now is the fact that it makes up one-half of a functional duopoly. This means that those who want to buy aircraft are basically left with either Boeing or Airbus (EADSY) for fulfillment. Boeing may have a captive audience, at least for now, but there are signs that others are looking to get involved.
Already, China is looking to produce aircraft, and the COMAC C919 is poised to hit the market soon with an eye toward producing 100 new planes a year. While that represents around two and a half months of Boeing production, that is still part of the market that Boeing cannot capture for itself. Thus, Boeing needs to put its focus on the customer.
Is Boeing a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on BA stock based on 13 Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 21.94% loss in its share price over the past year, the average BA price target of $216.59 per share implies 24.66% upside potential.
