CEO David Calhoun’s Mission To Fix Boeing:
When he was appointed CEO of Boeing last December, David Calhoun already had his hands full with the Boeing 737 MAX grounding. Then the coronavirus crisis hit, decimating demand for air travel and new airplanes. Wearing a mask and properly socially distanced, Calhoun met at the company’s offices in Arlington, Virginia, with AW&ST Editor-in-Chief Joe Anselmo and Senior Air Transport and Safety Editor Sean Broderick. Senior Propulsion Editor Guy Norris joined the conversation by phone.
- Boeing’s New Chief Discusses:
- “Tremendous progress” on MAX recovery
- Why the next airplane cannot wait for revolutionary advances
- Prioritizing new airplanes over the aftermarket
- Why the Embraer deal was scuttled
AW&ST: A year ago, Boeing said it would be rejiggering safety oversight and engineering because of the MAX situation. Now that you’re six months into the job, how far along are you in fixing those issues? I think we’re making tremendous progress. Those MAX moments [and the loss of lives] were devastating. It was like an earthquake. I don’t want anybody at Boeing or in the world to forget that. We have more work to do so those kinds of things never happen again. There is more board engagement around safety and implementation of a more comprehensive safety management system within the company to gather not just discrete failures on airplanes but also squawks in the service industry to highlight things we should be looking at in the company and processing in real time.
We’re also muscling up the engineering arm of the company. It’s really [allowing] engineers to be independent of program leaders and have a direct line to the board on safety reporting. We’ve announced all the reorganizations, and we’re not getting any pushback. Our program managers welcome it.
What makes you confident you’ve identified all the issues with the MAX and won’t see a similar situation on the 777X or anything else that comes down the road? The alignment of our company around the engineering function. That single function, with its eye on safety, will have the authority and the charter to get ahead of the issues as opposed to catching up to them. Our 737 customers have zero concerns on confidence. A bunch of them have been flying it for a long time with no trouble, and a whole bunch of pilots love the aircraft. Now we’ve got to make sure that consumers understand this fleet of airplanes has a long history with a good safety record and just went through a deep examination with respect to certification.
Are there lessons learned from the MAX situation that you’re able to apply? That pilot-control interface is real, and it should be studied every day. It should be studied based on the complete variation of skills that are available to the aviation market. We can never short that again. Every time we drop a spec for a flight control system in an airplane, we’ve got to understand this man-machine interface. And we have to understand it well, and it has to be contemporary. I don’t think we’ll ever miss that one again.
So much focus has been on “fixing” the MAX, but there are bigger-picture issues with human factors and understanding pilot populations and different training. We know the pilot population has changed. We know where we’re selling airplanes and how young the compliance systems are in some of those markets. One of Boeing’s initiatives is addressing some of that, though we haven’t had much of a chance to talk about it because of all the questions about MAX and COVID.
The COVID-19 crisis reminds us of when you took the helm at GE Aviation shortly before the Sept. 11, 2001, terrorist attacks. You steered that company through the recession that followed. This one is more severe and is going to take longer to recover from. Having gone through 9/11 gives me faith and confidence. I don’t think anybody put forward as much capital as [GE] did at the time, and it paid off. When we’re through the COVID waves, when vaccines are widely distributed around the world and people have begun to recover from the fear of the virus, we’ll be right back to where we were. Global trade will not stop, global economic interdependence will not end, and the growing middle class in the world will want to travel. When you have faith in that, you can plan for the transition period. In Boeing’s case it might be three years, or it might be five. I believe we have the resources and can sustain the research programs. We’ve got a portfolio of products to get us back and not just survive but win.
Is it fair to say the new midmarket airplane (NMA) is dead? Our team was out talking to plenty of people about it, but since we don’t have a point design for our next airplane, I have to suggest that any particular vision anyone has for it right now does not exist. The design tools and production tools were always the most important part of the next point design, because we need to build that airplane for less money, more efficiently and to a higher level of quality than we’ve done in our lifetime. We’ll get whatever [efficiencies] we can garner out of the propulsion community, but those kind of increments are not like they used to be. And so our differentiation at the airframe level has to be significant. I just think we got a little bit ahead of ourselves with the point design discussion. This is not about competing with the Airbus A321. This is portfolio versus portfolio, and we’re going to find the spot where we think our customers want to fly in the most efficient way they conceivably can. We’ll hunt for the biggest market, and that does not necessarily pit it against the A321.
You’ve got extra time now to develop your next commercial airplane. Does that open the door to technology previously thought to be a bit ahead of its time, such as the transonic truss-based wing? I think an airplane will be introduced before we get to that, or hydrogen and electric—all those things. That’s the second generation, at least for this company, and I believe for the industry. But I do think there are a number of technologies that ultimately will get deployed. Again, it may have more to do with the way they’re designed and built as opposed to the design itself.
The French government has linked its support package for Airbus to the introduction of a hydrogen-powered, carbon-neutral airliner by 2035. Do you think that’s real, and could it have an impact on Boeing’s product development strategy? I don’t think the time frame the government suggests is reasonable. It’s something longer than that. On the other hand, I’m all in favor, and I think Boeing will be a player. I don’t think we’ll ever allow ourselves to play second fiddle on that, amongst other alternatives.
My big hope in this COVID moment is that there’s going to be a serious [parking] of [older] airplanes that need to be taken out of the skies, and they will steadily be replaced with today’s technology, which is 20-30% more fuel-efficient and environmentally friendly. With all the growth, nobody really set down large parts of their fleets, but I think that day is on us, and I don’t think that will be lost to the political and environmental interests out there. I think they’re going to put pressure on the industry to take that step change with today’s technology.
There’s talk of a need for a 30% gain in fuel burn in the next-generation of narrowbodies. What is the most likely way to get there? Is it hybrid-electric, hydrogen, the structural concepts? There is not any one—it’s going to be some version of hybrid in my view. There’s going to be some development with respect to the wing and weight. Our ecoDemonstrator tests small increments in environmental and efficiency gains, and each little one will add to the list. But getting to 30% from where we are today is a long way.
How do you feel about your current commercial airplane portfolio? I like it. I don’t feel desperate for anything. The 737 is rock solid. The MAX is going to be as safe as any other 737, if not safer, because of all the things that have been incorporated into the certification process. And the center of the market is not the A321—it’s still the 737-8 in our world. [In widebodies,] I love our position on the 787. The market’s going to slow down for a while [because of the drop in international travel], but people love the performance of that airplane. I love the 777X. We’ve tried to incorporate everything we can from this new certification process into the 777X certification. We’ll start slower, no question, but I think we’re going to be in a pretty good place on that.
Boeing had a deal to acquire 80% of Embraer’s commercial aircraft business, which would have added the E2 to the lower end of your portfolio. Why did you pull the plug on the deal at the last minute? I made the decision as CEO. It was more about the deal than anything. Deals that involve shares, governments and other things sometimes get so tightly negotiated that they require that certain things are going to be a certain way when you push the button. This deal fell apart because what we thought we bought didn’t turn out to be exactly what we got. There were a number of closing conditions that Embraer did not meet by the deadlines. It doesn’t change my view that strategically the two companies had complimentary forces that would have been good for the industry, but in this case the deal fell short.
Airbus has a broader narrowbody product line, starting with the A220 (formerly C Series) and going up to the A321neo. Boeing was offered a really good deal to acquire the C Series before Airbus and turned it down. Was that a mistake? Absolutely not. I don’t think there was ever a good deal. I would question that premise.
Boeing in recent years made a big push into the aftermarket space. How does that balance whether you want to incentivize customers to park older airplanes? I want to do what’s good for the airlines, and I believe it’s good for them to park inefficient parts of their fleets. That will definitely have an impact on my services business. We will make adjustments to reduce that footprint to accommodate what we think is going to be a younger, fresher fleet. While I believe strongly in the opportunity in the services market, I will always favor the most efficient fleet over my desire to maintain older planes. That may sound like heresy, but it’s not.
What does that mean for Boeing’s goal to generate $50 billion annually in aftermarket revenues? Let’s just say that we have a big adjustment to make. It’s still a big opportunity on the government side, which is more than half of the services business for us.
Boeing has faced major challenges across the company—the MAX in commercial, the KC-46 tanker in defense and Commercial Crew in space. Are you detecting a systemic problem, or are these individual and coincidental problems? I think they’re unique to themselves, with one exception. It is not a surprise to anybody that the supply chain, production ramp-up and growth of the industry over the last 5-6 years has brought all kinds of stresses. You’ve been writing about it for quite some time. All the production lines and pretty much everything else had been stressed to move faster than they would otherwise be able to. And I think that takes a toll. I’m not saying that’s the identical situation for each of these programs you’re calling out, but that’s the environment we’ve had for quite some time. Otherwise, these are unique problems.
At the end of the day, we didn’t get done what we said we would, and we suffer in reputation, brand and confidence. So my Job 1 is to get back onto a stable platform in each of these cases. They can be made whole, and we’ll be proud of them. But we’re going to do it at a very slow, disciplined pace, and our confidence will come back with that.
The MAX grounding and COVID-19 have forced you to make some pretty brutal production cuts. What steps are you taking to make sure your key suppliers survive? Are you easing up on Partnering for Success? Yes. I think Partnering for Success may have gotten misinterpreted over the course of the years. I’m going to pledge transparency and support to our supply chain. [When the COVID crisis hit] and the credit markets practically shut down, we lobbied the [Trump] administration as hard as we could for support to the industry. We asked for big numbers, and they responded beautifully with the CARES Act. I’ve been surprised at how few have actually reached out to use it.
With respect to the rates, we’re pledging pure transparency. I want them to know everything I know every day. We have tried to keep our suppliers ahead of us with respect to rate to protect our stability when we do begin to recover. We have definitely built that buffer into our system.
Boeing recently raised $25 billion from the capital markets. Do you anticipate having to raise any more money or take government aid in the coming year, or are you set? I certainly hope not. Our intention was to get us to the other side, not just through a year. That was a three-year deal for us. In the meantime, I would argue that the more troublesome problem in our industry was supply constraints and the instability of the supply chain. Without a virus, I don’t think that was going to get fixed anytime soon. With a virus, you have an opportunity to reengineer lines and reengineer the supply chain and get ahead of the curve. I think both players [Boeing and Airbus] are starting to use the word “stability” more often. You can’t get to the next level unless you’re jumping off a stable platform.