Sat, 23 Nov 2019

Boeing said Kevin McAllister is stepping down as head of its jetliner division after less than three years amid a crisis engulfing the 737 Max and production snarls with other planes.

Stan Deal, the head of Boeing's global services business, will replace McAllister, the company said in a statement on Tuesday. McAllister, who joined Boeing shortly before the Max's debut, is the first to depart from Boeing's upper echelons since two deadly crashes prompted a worldwide grounding that began in March.

The exit marks the second jolt to Boeing management this month, after Chief Executive Officer Dennis Muilenburg was stripped of the chairman's job October 11.

The flying ban has cost Boeing more than $8bn (around R117bn), and the Max isn't expected to carry passengers until next year. Meanwhile, the company is due to report financial results on Wednesday, and Muilenburg is slated to testify before Congress next week.

"The drumbeat for major executive changes is only getting louder," said Richard Aboulafia, an aerospace analyst at Teal Group. As for McAllister's ouster, "I'm not sure what it accomplishes, but at least Stan Deal is a really great choice."

Boeing rose 1.8% to $337 at the close in New York. The shares have tumbled 20% since an Ethiopian jetliner plunged into a field on March 10, the worst performance on the 30-member Dow Jones Industrial Average.

With Deal, Boeing is tapping an executive with deep sales and supplier-management experience to lead the company's largest business amid one of the biggest crises in its 103-year history. He will be replaced at Boeing's services division by Ted Colbert. Vishwa Uddanwadiker was named as Boeing's interim chief information officer, replacing Colbert.

First outsider

The leadership overhaul followed a board meeting Monday in San Antonio. The gathering was described as excruciating by a person familiar with the discussions, because of the pressure on directors and the drubbing Boeing was taking on Wall Street.

McAllister's departure is one of the company's first major moves since former General Electric vice-chairperson David Calhoun was named as Boeing's non-executive chairperson. Calhoun knew McAllister from an earlier stint at GE's engine division and was instrumental in recruiting him to Boeing.

READ: Boeing board strips CEO of chairmanship after 737 MAX crisis

As the first outsider to run Boeing's main business, McAllister faced a steep learning curve when he jumped from GE Aviation's $9bn services business in late 2016. The challenge deepened immeasurably when two newly built Max planes crashed within a five-month span between October 2018 and March of this year.

Regulators grounded the jet following the second fatal accident, turning Boeing's largest source of revenue into a cash drain overnight. Multiple investigations into the design and certification of the jet are underway, and Boeing's reputation for safety has been battered.Warm and self-effacing in person, McAllister had a lower public profile than his predecessor, Ray Conner, a former chief salesman known for his white glove treatment of key clients.

While the 737 Max was largely designed and certified on Conner's watch, McAllister drew criticism for not paying enough attention to some customers following the accidents. He retreated further from the spotlight as Muilenburg became the public face of the company during the crisis. The CEO is set to appear before US House and Senate committees next week.

Other stumbles

The commercial-airplane unit had other stumbles under McAllister. While the division notched strong sales, the 737 assembly line struggled with a shortage of engines and other parts last year. The KC-46 tanker and 787 Dreamliner programs were marred by tools and debris left within completed frames.

The jetliner division generates about 60% of Boeing's revenue, with a product lineup that spans the best-selling 737, first designed in the 1960s, to the Dreamliner's advanced technology.

Deal, who holds an aerospace engineering degree from the University of Illinois, joined Boeing through the merger with McDonnell Douglas in 1997. He worked his way from the MD-11 Japan Airlines program to a variety of leadership roles in sales and marketing for Boeing's jetliner division.

He worked closely with Conner as senior vice-president of Commercial Aviation Services, later ascending to the company's executive counsel when Muilenburg created a global services division in 2017.

More recently, Deal kept a hand in airplane manufacturing even when running the new services business, which is focused on spare parts and maintenance. The company's new forays into vertical integration, such as joint ventures to make deluxe airplane seats and auxiliary power units - the mini engines in a jet's tail - reported to Deal.

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