It’s been a rough couple of years for Boeing (NYSE: BA). After two deadly crashes involving its new flagship airliner, the 737 MAX, aviation authorities around the world were forced to indefinitely ground Boeing’s state of the art plane.
Both accidents involved a malfunction with the MAX’s Maneuvering Characteristics Augmentation System (MCAS). The first sent Lion Air Flight 610 into an automated nosedive on October 29, 2018. The second caused Ethiopian Airlines Flight 302 to do the same, even after Boeing released updated training materials showing pilots how to disengage MCAS. The pilots aboard Flight 302 attempted to use the new procedure to no avail.
As a result of the second crash, congress investigated the Federal Aviation Administration’s (FAA) certification of the aircraft and Boeing’s self-approval authority, the latter being a severe flaw to many congressmen and women.
Finally, one month after the Ethiopian Airlines 737 MAX went down, Boeing admitted that MCAS has played a role in both accidents. Investigators found that the company had failed to properly analyze the safety of late design changes to the MAX’s MCAS. Moreover, Boeing didn’t inform the FAA about the changes.
Since then, Boeing’s leadership has been equally disappointing. Shortly after the second crash, CEO Dennis Muilenburg assured President Trump that the 737 MAX was safe. Which was, sadly, proven untrue by regulatory investigations a month later.
On April 29, 2019, during a Boeing shareholders meeting, Muilenburg dodged questions related to the 737 MAX crashes. He again reiterated, even after Boeing’s MCAS was found to have caused the deaths of 346 people, that the 737 MAX was inherently safe.
In November 2019, Muilenburg announced that he wouldn’t be taking a bonus for the year. The attempt to save face fell flat with investors, who were more than happy to continue selling BA shares. By December, the stock had fallen 25% from its pre-Ethiopian Airlines crash high.
And then, via some sort of Christmas miracle, Muilenberg stepped down as CEO on December 23rd. Former Boeing chairman David Calhoun replaced him, taking what may have been one of the “hottest seats” in corporate America.
Some analysts, who would’ve preferred an outside hire, bemoaned the fact that Boeing was promoting from within. Calhoun was chairman of the board during the 737 MAX fiasco, after all.
It would’ve made sense to go in a different direction.
But instead, Boeing’s board felt confident that they had “their man.”
And now, more than a month later, it looks like they were right.
Before the market opened this morning, Boeing announced its Q4 2019 earnings, in which the company posted its first annual loss ($636 million) since 1997. Fourth-quarter revenue dropped 37% year-over-year to $17.91 billion, while Boeing stock registered a loss of $2.33 per share.
Overall, the company estimates that the 737 MAX debacle cost more than $18 billion, or double what it expected when Q3 earnings were released.
But instead of a share price meltdown, BA is up 1.55% as of midday. It was all bad news, but somehow the stock soared.
And it’s all because of one man:
David Calhoun.
As the new CEO, Calhoun has completely transformed Boeing’s culture. No more hiding behind marketing. No more “corporate spin” to avoid answering the hard questions.
Instead, Calhoun has gone 100% transparent.
Earlier this month, internal Boeing messages were leaked to the press, showing company employees boasting about pressuring regulators into accepting less training for the 737 MAX. The messages came from some period before the two 737 MAX accidents, suggesting that Boeing’s negligence may have been far worse than initially believed.
In an interview on CNBC’s “Squawk Box” this morning, Calhoun said, “My stomach turned. The language is horrible,” referring to the messages.
“We found out [about the messages] way too late,” he added.
“There was only one moment in time that if we had found out, we all would have done something. That is the day it was written.”
In his remarks, Calhoun showed his (and Boeing’s) hand. It was a “come to Jesus” moment in many ways for the company, and indicative of its standard operating procedure moving forward.
We’ll find out whether Calhoun sticks to his guns or not when Q1 earnings roll around, but for now, investors seem to appreciate his efforts to stay above board – something his predecessor, Muilenburg, never made a priority.
