Boeing Ousts CEO amid 737 MAX Fiasco

Today, Boeing (BA) announced the resignation of Dennis Muilenburg as the CEO and director of the company’s board, effective immediately. The company named chairman David L. Calhoun as the new CEO and president effective January 13, 2020. Calhoun would continue to serve on Boeing’s board. The company named Lawrence W. Kellner as the non-executive chairman of the board, effective immediately.

Boeing named CFO Greg Smith as the interim CEO during the short transition period. Wall Street welcomed the news of Muilenburg’s exit, as Boeing stock was up 2.8% at 2:31 PM ET today.

Boeing CEO’s departure amid the 737 MAX crisis

CEO Dennis A. Muilenburg was under pressure to resign as customers, regulators, and investors lost trust in the company following two fatal 737 MAX crashes. In October 2018, a Boeing 737 MAX 8 crashed in Indonesia, killing 189 people on board. In March 2019, a 737 MAX crashed in Ethiopia, killing 157 people.

Investigations revealed that the two deadly crashes resulted from a series of failures. These failures included software issues related to its automated MCAS (Maneuvering Characteristics Augmentation System). Boeing’s MCAS was designed to be a safety feature that would prevent an aircraft from entering a stall by automatically lowering the aircraft’s nose.

In October, Dennis Muilenburg testified before the US Senate and accepted the flaws that caused the two deadly accidents. Reuters reported that during the Senate hearing, lawmakers and family members of the victims pressed for Muilenburg’s resignation.

Continued pressure

Boeing’s ongoing problems are creating a ripple effect. On December 16, the aviation giant announced that it would halt its Boeing 737 MAX production effective January 2020.

The company’s production halt also puts its suppliers at risk. On December 20, Spirit AeroSystems announced that it would suspend all 737 MAX deliveries to Boeing next month. According to Spirit AeroSystems, 737 aircraft components generate over 50% of its annual revenue.

The Boeing 737 MAX crisis has also significantly impacted customers like Southwest Airlines (LUV) and United Airlines (UAL). United Airlines has extended its Boeing MAX grounding from early March until June 4, 2020. Meanwhile, American Airlines has canceled Boeing 737 MAX planes until April 6, 2020. Southwest Airlines (LUV) is removing all Boeing 737 MAX flights from its schedule until April 13.

Following the company’s announcement of the 737 MAX 8 production freeze, rating agencies Moody’s and S&P downgraded the company’s credit rating.

The latest embarrassment for the company happened when its spacecraft Starliner failed to reach the correct orbit after an automation error. Overall, Boeing stakeholders hope that the new CEO will address the 737 MAX crisis at the earliest opportunity and resume production after adhering to all safety measures and regulations.