Here’s What Boeing (NYSE:BA) Needs to Do to Recover from Disaster
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Here’s What Boeing (NYSE:BA) Needs to Do to Recover from Disaster

Story Highlights

Boeing is at a crossroads right now, with a declining reputation and a rising cash burn rate. Here are some key points for it to keep in mind as it executes its hoped-for turnaround.

There’s no doubt at all at this stage of the game that aircraft maker Boeing (NYSE:BA) is not what it once was. In fact, there are distressing signs that suggest it may never be what it once was again. But there are also potential ways for Boeing to recover, and we’re going to have a look under the hood and see if we can spot some points that could make for a Boeing turnaround.

Replacing the CEO

The biggest change at Boeing has to come from the top. With Dave Calhoun on his way out—well, sort of; he’s still on the board of directors, just no longer the CEO—it’s a great opportunity for Boeing to announce to the world that it is fundamentally changing its culture. While it will still have a focus on shareholder returns, it must make clear that the new priority is customer safety. That won’t be easy, especially after Boeing deliberately altered its rules to raise mandatory retirement ages from 65 to 70, ostensibly with an eye toward keeping Calhoun in the big chair through 2028.

And right now, it’s not really impressing anyone with its current batch of possible replacements. While there is no true front-runner to take over for Calhoun, there are generally two major candidates right now. The first is current chief operating officer Stephanie Pope, who many believed was being groomed to take over for Calhoun to begin with.

That might actually be a bad move right now, as Boeing needs to distance itself from the recent past, which features plane crashes and occasional fatalities in staggering numbers. Others want to dip into Boeing’s recent past and bring back Patrick Shanahan, the current CEO of Spirit AeroSystems (NYSE:SPR). But that comes with something of the same problem.

Perhaps the better candidate here is Larry Culp, currently with GE Aerospace. He has knowledge of aerospace systems and an excellent record with GE, which itself needed a turnaround not so long ago. Getting him out of his current position might be a tall order, though.

The key point here is that an outsider is perhaps best called for; the news will likely gall Pope and potentially cost Boeing her altogether, but the sheer necessity of being a different Boeing is too important to pass up.

A Different Boeing

With the head of the hydra replaced, Boeing then needs to focus on internal improvements. With a slew of whistleblowers coming out to detail disastrous events at Boeing, it may be a good time to take advantage of that. Publicly hire the whistleblowers as “quality consultants” or something similar. Make it so clear to anyone paying attention that Boeing is taking safety culture so seriously that it’s willing to pay the people who dragged it through the mud to fix things.

It would become unimpeachably obvious that Boeing wants to fix things. No outside observer will be able to question Boeing’s commitment to safety when it’s taking its marching orders from the people who came forward to detail what’s wrong in the company.

Then there’s the problem of Boeing’s delivery troubles. Boeing just lost out on a major order to Saudia Airlines, as Airbus (OTHEROTC:EADSY) just seized the entire thing. That’s a loss both now and in the future; the odds of Saudia turning to Boeing in the future, especially if Airbus provides a good quality plane now, are long. Inertia is a thing; it will take a remarkably compelling case to break Saudia away from a supplier that clearly delivers better than Boeing.

Therefore, Boeing needs an aggressive marketing ploy to bring back burnt customers. A new plane may be just the thing; some have already made it clear that Boeing needs a new plane. Melius Research analyst Robert Spingarn noted that “Boeing’s in the middle…” right now, with “…an aircraft that’s had trouble.” Worse yet, it’s “…getting to the point where your competitive edge is at risk.” Bringing out a new plane might be just the thing to convince customers to come back to Boeing. Especially if it’s got a new CEO and culture that values safety above all else.

There was no doubt there would be Monday morning quarterbacks detailing what Boeing “should do” to fix itself. But it’s clear that it needs to do something, and quickly. Boeing has too many points of failure right now, and unless something changes, we may well see an American institution collapse.

Is Boeing a Buy or Sell Stock?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on BA stock based on 17 Buys, seven Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 14.74% loss in its share price over the past year, the average BA price target of $219.57 per share implies 25.81% upside potential.


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