Boeing CEO Plots Course for Next Plane in Biggest Test After Max
Boeing CEO Plots New Course for Next Jet in Biggest Non-Max Test
(Bloomberg) -- Boeing Co.’s newly installed chief executive officer, Dave Calhoun, had a simple response when asked to describe the market the planemaker intends to target with its next all-new jetliner: “I don’t know.”
That’s the point of a strategic review Calhoun commissioned soon after becoming CEO, when he ordered a rethink of a project known as the NMA, or new midmarket airplane. A team is now canvassing customers and conducting a fresh evaluation of a segment overlapping the largest single-aisle jets and smallest wide-body planes, where Boeing’s 757 and 767 jets once thrived.
“I want an airplane spec that I believe in,” Calhoun told reporters Wednesday after the company reported fourth-quarter earnings. Once a design is set, Calhoun indicated that Boeing is prepared to move quickly on a development program even as it seeks an exit from the 737 Max crisis.
Charting Boeing’s jetliner pipeline is one of Calhoun’s most important tests as CEO after the effort to restore the grounded Max to service. The company’s capital is precious, with the Max recovery expected to consume more than $18 billion and dent the long-term profitability of the company’s cash cow. Calhoun dismissed speculation that Boeing might put any high-stakes aircraft gambles on hold.
“We’re in the airplane-development business and we’re going to stay in the airplane-development business,” he said.
There’s risk that a midrange jet would cannibalize sales of the wide-body 787 Dreamliner family. And speculation has mounted that Boeing would open the door to a Max replacement, with demand and market values for the workhorse plane in question following two deadly crashes and a grounding that recently surpassed the 10-month mark.
“In the long run they need a new narrow-body,” said George Ferguson, an analyst at Bloomberg Intelligence.
At the same time, Ferguson said he doesn’t see any chance that Boeing will scrap its 737 Max program and warned that investors would become “more skittish” if the company decided to build a new single-aisle plane over the next half a decade.
Airbus Gains
Airbus SE has made significant inroads recently with versions of its A321neo narrow-body that can cruise across the Atlantic Ocean, winning orders last year from longtime Boeing operators such as United Airlines Holdings Inc. and American Airlines Group Inc.
Calhoun said he wasn’t worried about losing ground to Boeing’s European rival as the Chicago-based manufacturer heads back to the drawing board.
“We won’t design on the basis of the A321,” he said, vowing to differentiate any new design from Airbus’s offerings.
A year ago, Boeing was deep into planning for the NMA, envisioned as a family of twin-aisle jets that would haul between 220 and 270 or so passengers. The model’s frame would be an unusual ovoid shape, offering roomier passenger cabins and smaller cargo compartments.
But program managers never closed a business case that included the challenge of bringing production costs for a complex twin-aisle jet closer to those of a single-aisle plane. Calhoun said he made the decision to change course after consulting with Stan Deal, who took over as head of Boeing’s jetliner division in October.
New Tools
Their plan is to take advantage of the digital engineering tools that were intended to trim time and cost from the NMA’s development while rethinking a new plane. “Design and manufacturing studies will continue going in full force,” Calhoun said.
His predecessor, Dennis Muilenburg, tabled key strategic decisions on the NMA, like selecting engines, when the 737 Max was grounded in March after two fatal accidents. Calhoun said he didn’t see a conflict between the two challenges, pledging to leave the work of honing the next airplane family to a small team of technical experts.
“It’s not going to occupy a lot of my time,” he said. “With respect to Boeing, I’m all about the Max.”
To contact the reporter on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net
To contact the editor responsible for this story: Brendan Case at bcase4@bloomberg.net
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