Boeing CEO's ejection brings stability - temporarily

New York

BOEING'S ejection of Dennis Muilenburg from the pilot's seat will bring some stability, at least temporarily, for the US$190 billion company.

The board's decision to replace him with current chairman David Calhoun offers the aviation giant a chance to reset strained relationships with regulators and customers.

But his appointment just two days before Christmas also indicates that problems with the grounded 737 MAX, or the company's ethical culture, may be more severe than previously assumed.

New management doesn't change the fact that Boeing faces a financial crisis. The grounding of the plane since March has created an enormous financial strain. Roughly two-thirds of profit last year came from selling commercial airplanes and the 737 represented about 70 per cent of planes delivered.

There are also costs for reimbursing customers for delays, keeping skilled workers on staff and supporting critical suppliers. The cash-burning firm has increased its debt by nearly a third in the last quarter to US$24.7 billion, but that can't continue forever.

Long-term damage

The long-term reputational damage is worse. Mr Muilenburg promised multiple times that the aircraft would soon be in the air, but failed to deliver. United Airlines just said it doesn't expect the plane to be back on its schedule until June.

US Federal Aviation Administration boss Steve Dickson had to put out a memo urging employees to "resist pressure" to return the aircraft to flight prematurely.

Mr Calhoun offers hope for a new start.

Candour about any remaining issues with the plane must be a top priority. Mr Muilenburg's ejection and the plane's continued grounding may indicate that regulators at home or abroad require additional software revisions, pilot training or in the worst case, structural changes to the plane itself. Write-downs may also be coming if Boeing thinks it will sell fewer planes.

Mr Calhoun also needs to refocus the company on its engineering roots - instead of pleasing Wall Street with rising margins and capital distributions - and designing safe, cutting-edge planes. His experience running General Electric's engine business and a decade as a director at Boeing will help.

Unfortunately, his background as a trained accountant, compounded by the fact he was on the board throughout the 737 MAX disaster may also indicate the company hasn't truly acquired the old-time religion. REUTERS