How to Fix Boeing

How to Fix Boeing

Boeing is at a critical juncture. Their recent failures have been spectacular and covered extensively in the news. In 2018 and 2019, 346 people died in 2 separate 737 MAX 8 airplanes. And in January of this year, a piece of the fuselage (a “door plug”) came off another Boeing airplane while in flight.

These failures have been a long time coming, and are the symptoms of long-term mismanagement. The mismanagement is reflected in an empty product pipeline, an aging workforce, a faltering defense business, and huge spending on stock buybacks while the company remains deep in debt. To top that off, Boeing paid an astounding $32.8M last year to the CEO who is flying Boeing into irrelevancy.

Boeing’s trajectory is sad, but it’s not irreversible. The company has a diversified portfolio. It needs to lean into its winners and pivot away from its losers.

Here are my thoughts on what the next set of company leaders should do with each of the 3 major business units:

  • Commercial Airplanes, which makes passenger and cargo planes for airlines
  • Defense, Space, and Security, which is a major defense contractor that makes everything from satellites to fighter jets
  • Spare Parts and Aftermarket Services (spoiler alert: this unit is in the best shape of the three)

Disclosure: I was an intern at Boeing 11 years ago, but none of these thoughts are directly related to that experience.

Commercial Airplanes

This is the part of Boeing that we are most familiar with, and in many ways the crown jewel. It makes passenger and cargo aircraft, like the 737 family and the 787. Surprisingly, this unit only makes up 40-45% of the company’s revenue in recent years. 

It sounds obvious, but Boeing needs to stabilize its existing airplane programs by focusing on quality control. This means ending near-term distractions like other requests it has pending with the FAA. After it gets that under control, Boeing should launch a new airliner program. Building a new aircraft may sound incongruous with putting a singular focus on quality, but I will explain why it is necessary.

Stabilizing existing programs

Boeing’s commercial airplane business has been in a long-term, stable duopoly with Airbus, riding on the growth of global air travel. It has a host of advantages in this business: a storied brand, a massive install base with marquee customers flying all-Boeing fleets, a hometown regulator, and the export power of the US government. 

However, over the past several years, it has been steadily losing share. In 1995, Airbus had 18% market share. Under the guidance of a legendary sales chief, Airbus navigated missteps like the A380 program and worked its way to a 50/50 market share split with Boeing by 1999. This 50/50 split was durable for the better part of two decades, but has now tilted to 62/38 in Airbus’ favor (measured by backlog of orders for Boeing’s 737 family vs. Airbus’ A320 family). It may be heading for 70/30.

Airbus A320 (light blue) / Boeing 737 (dark blue) order backlog from July 2022 Source: FT

The reasons for the recent decline are simple. After the 2018/2019 MAX crashes, Boeing lost the trust of its airline customers, and hasn’t been delivering enough aircraft to keep up. Boeing was slow to diagnose and admit the issues with the MAX, and slow to resolve them. This resulted in protracted groundings, which infuriated airline customers who invested large amounts of money in these airplanes. Other factors have sped up the decline in market share, e.g., Airbus gaining control of a potential third competitor, and thereby adding a new, efficient plane to their lineup. That is a wild story for another post.

Boeing’s top priority should be to get back to delivering aircraft safely at full rate. It should welcome customer and regulator representatives to visit its factories, inspect its lines, and participate in finding solutions to production issues. This should be everybody’s focus. That is the only way to restore confidence and to get the FAA to agree to expand production.

To give the FAA confidence that Boeing can produce quality airplanes, it needs to actually do the things you would do if you want to produce quality airplanes. Boeing cannot achieve this by checking boxes or adding compliance paperwork alone…it must actually embark on the spiritual journey of wanting to make a good product and having its whole team buy into that. Clearly something is broken here. Managers need to spend more time on the shop floor. Quality management systems must be improved. Factory workers must be incentivized and aligned with the right objectives. The current negotiation with a major factory union is a great opportunity to set this last point on the right path.

Fixing the 737 MAX 9 (the aircraft involved in the door plug incident) means deprioritizing certification of two other aircraft variants in the 737 MAX family: the 737 MAX 7 and 737 MAX 10. Certification of these aircraft is pending resolution of an issue with the anti-ice system. Finally, there are issues with the 777 and 787 as well, but those should also be addressed after the MAX is stabilized.

Launching a new program

Dave Calhoun, the current CEO, has repeatedly said a new aircraft is not coming any time soon. He allegedly told Wall Street analysts: “Don’t worry, we won’t be launching anything new for at least another decade.” This is horribly backward. Despite all its issues today, Boeing needs a vision for the future. If it is not going to build anything new, we should be worried. What’s the point? Is the company just going to harvest until it winds down?

Boeing needs to announce a new aircraft program. It should wait until the MAX situation has stabilized to announce this, but not too much longer. Here are the core arguments why (some other references): 

  • You need to build new products to attract and retain engineering talent; if you don’t, your engineering muscles will atrophy.
  • There is a huge market for next-gen airliners at stake, worth $100B+; competitors will take it if you don’t, and you’ll miss out on the next generation
  • Mature technology can already produce a sufficient efficiency gain (10-15%) to justify the investment, despite what Boeing executives say

Frankenstein extensions of current products have been taken as far as they can go, and have problems of their own (the 737 MAX is a prime example). Engine upgrades can only improve the aircraft so much, and have similarly been taken to their current limit. Boeing needs to develop a clean sheet design. There are plenty of candidate configurations, like the Truss-Braced Wing, Blended Wing Body, or the D8 Double Bubble. These have all been studied by Boeing at various points. Boeing could use this as an opportunity to leave the local maximum of the “tube and wing” design.

It is reasonable to wonder whether a new aircraft program would distract from the ability to fix quality issues on the 737 MAX. In the early phases, the people involved in the preliminary design would be a mostly distinct set from those working on the production systems for the 737 MAX. There should be minimal resource contention here. Once the program gets going, there will be some splitting of executive attention, but there is no way around this, and the program is existential.

If Boeing does not develop a new aircraft, new entrants like COMAC, Embraer, and startups will enter the narrowbody market and take Boeing’s place in the next product iteration. They may enter anyway, but Boeing should participate in the market it created.


There are time-sensitive workforce issues that weigh on both Boeing’s need and capability to launch a new aircraft.


The company is suffering from an engineering workforce age problem that is a ticking time bomb. By some indications, nearly half of the engineers in Boeing’s Seattle base are over 50 years old (although recent data is hard to find). 

These workers will take critical tribal knowledge with them when they go, leaving gaps that will be very hard to fill. Boeing’s last clean sheet aircraft program, the 787, was launched in 2004. An engineer who was 30-years-old at the time is now nearing retirement age. If Boeing waits another 5 or 10 years to kick off a new program, it will have nobody left who remembers how to design new aircraft. There needs to be a mass recruitment effort of younger people to refresh the workforce, and a new program for them to work on.

This recruitment effort should be biased towards more software engineers, to reflect the fact that modern aerospace products are increasingly like flying computers. The workforce’s expertise is tilted too far towards traditional aero domains.

Production workers

There are also issues with production workers in Boeing’s Seattle base, where the 737 MAX planes are built. Negotiations with the IAM, the largest union there, have started. The union’s expectation is 30-40% wage increases over the next several years, based on the benchmark of auto worker wage increases. This union represents 32,000 workers, or 21% of Boeing’s workforce. Boeing doesn’t have much leverage to push back, given the other issues they are facing.

The production workforce has been continually antagonized over the past couple of CEO tenures. Of special note, during the last negotiation with this particular union, Boeing’s management announced that they would build the 787 in a non-union plant in South Carolina. This decision antagonized the Seattle workforce and is still a source of embitterment.

Boeing should give the union what it wants, even at the expense of short-term financial pain. They should also consider commitments to build the next aircraft in Seattle. This would go a long way to align the workforce with Boeing’s future success.

Defense, Space, and Security

Boeing’s second largest business unit, which makes “Defense, Space, & Security'' products, is also struggling. The unit was historically an uncorrelated counterweight to the commercial unit’s cycles. Today, this unit is unprofitable and home to a range of programs that are perennially over budget and behind schedule.

Revenue was flat last year at ~$25B (32% of total), with a $1.7B loss. Charges are mounting on key programs.

Some highlights:

Boeing is not reliably able to deliver large projects on time or on budget. For some of these businesses, the answer might be to change to a more commercial posture. For example, there is a story to be told about how Boeing might evolve its satellite business to compete with newer entrants. There are some programs Boeing simply cannot get out of, and has no choice but to improve and deliver. 

For other product lines, especially ones without a significant contract win in sight, the right answer might be to exit / restructure the business. There is a stable of acquisitive defense contractors who might be interested in pieces of these businesses. 

Boeing should invest in programs / areas it wants to be a player in, and pare back the rest. One thing that may seem obvious but should not be taken for granted: this R&D investment should come from Boeing’s own money, not the government’s money. A company investing its own money to develop capabilities and products is so rare in the defense industry that it has been given a special name, “internal research and development (IRAD)”.


In space, the competition is just much stronger than it was 20 years ago. SpaceX is leading the charge, but there is a whole cohort of fast-moving companies eating Boeing’s lunch.

Some thoughts on a few of the unit’s space programs:

  • Boeing makes the core for the Space Launch System (SLS), a large NASA rocket which looks increasingly questionable vs. Starship. SLS has splintered itself across 46 states, making it very resilient politically. But if current trends continue, even it will be tough to defend.
  • The International Space Station, which Boeing has a contract to maintain, is set to be retired in 2030. Boeing doesn’t have a prime role in any of the successors.
  • As mentioned above, Starliner and the satellites division are still the sources of large charges. 
  • The X-37 space plane program is a bright spot.
  • Rumors suggest that Boeing was already looking to sell its 50% stake in United Launch Alliance (ULA), a space launch provider, before this year. That seems like a good idea. Boeing was not the right owner for that business. 

Actually, ULA may be a good model for what a Boeing transformation could look like. In 2014, the rocket company was struggling to respond to stiff competition from SpaceX’s Falcon rocket. It brought in the current CEO, Tory Bruno, who took decisive action to transform the legacy company into something more nimble. He launched a new rocket program, consolidated two legacy rocket families into one, closed redundant launch sites, refreshed the workforce, and built a partnership with Blue Origin. These changes took the better part of a decade. Boeing is a much larger organization than ULA, so will take longer to change. But ULA provides a relevant case study, and the lesson is that transforming the company should be viewed as a project of 5-10 years or more. 

Military aircraft

The future of Boeing’s military aircraft programs is not clear. There is still hope for Boeing to snag a generational program with the US Air Force’s next-generation fighter (“NGAD”) and the US Navy’s analog (“F/A-XX”). That could keep the lines humming and ensure Boeing’s relevancy for another 50 years. Winning one or both of those programs would be transformative. 

With the rest of the portfolio, it is worth considering all the strategic options, including divestitures.

  • For existing programs, the F-15 jet continues to deliver incremental improvements.
  • The F/A-18 jet line is finally scheduled to be closed in 2027, after a few postponements. Those workers will presumably be moved to work on the F-15 and T-7.
  • The delivery of the first T-7As, a small aircraft the US Air Force will use to train future pilots, seems to be an exception and is a source for optimism.
  • Boeing’s rotorcraft programs are not in a healthy state. The company was shut out of the two large next-generation military helicopter programs: FARA and FLRAA. FARA has since been canceled, which means some Chinook (CH-47) and Apache (AH-64) helicopters will see a longer life, but it is not a long-term answer for Boeing. The Army has signaled it may prefer smaller, uncrewed aircraft to more expensive crewed platforms going forward. Boeing’s experience with ScanEagle and MQ-28 may help it here.
    • The Apache and Chinook helicopter programs are very much late-stage programs, and there doesn’t seem to be any major work coming down the pike. Boeing’s efforts to develop new, innovative concepts in this area, e.g., autonomy with unmanned AH-6 Little Bird helicopter, or the A160 Hummingbird helicopter all seem to have failed or been deprioritized. It’s not clear what the future of the rotorcraft division is. Boeing does not currently have any commercial helicopter programs that might offset the slumps in Department of Defense (DoD) demand, as peers Airbus, Leonardo, and Bell do.

The company now owns 100% of Wisk, which could be viewed as its future commercial VTOL bet. Wisk has a very ambitious vision of autonomy, and this project should be applauded. On the flip side, Boeing’s track record of cultivating startups is poor. It is probably better off buying mature concepts.

Disclosure: I work for another company building autonomous aircraft, in a similar space as Wisk.

Spare Parts and Aftermarket Services

Boeing’s commercial aftermarket unit is the only unit without significant issues right now. It earned $19.1B in revenue last year (~25% of the total), with a 17.4% operating margin. 

Boeing needs to lean into this business. There are strong macro tailwinds, and ironically, performance here may improve if the commercial unit ships fewer new airplanes. Maintaining an older fleet will require higher maintenance spending.

Boeing’s share of its own aftermarket spend is low compared to others, but the wave of “predictive maintenance” spending presents an opportunity to grow, aided by data the company has preferential access to. This is not just zero-sum…Boeing may actually save airlines money by reducing airlines’ maintenance spending, while taking share.

There are, however, still issues with basic “blocking and tackling” in this unit. For one, the integration among the various legacy businesses Boeing acquired to form this unit is not operationally complete. There are still multiple ERP systems, competing internal teams/projects, and unneeded complexity. These issues should be resolved. The performance of this unit might also be even stronger if not for the distraction of issues in other units.

So What?

Boeing is starting from a remarkable legacy, and has so many things in its favor. But poor execution, an unfavorable mix of complex legacy businesses, and bad luck have left it in a very tough spot. 

It is timely that GE, an American industrial base peer, has just finished splitting itself up into 3 companies. That process took 5 years. It’s not a stretch of the imagination that Boeing could be in the same situation 5 years from now. That might not be the worst thing, given the new GE companies’ share prices. But if Boeing wants to avoid a breakup, new management needs to make big changes.

There is absolutely a way out of the current situation. The company needs to give its workers and customers a clear vision of the future, and that future needs to involve new products. Overall, I suspect the future Boeing will need to be leaner and smaller, with a more focused portfolio.

The company likes to talk about the aerospace milestones it was a part of during its first 100 years. But if it doesn’t make significant changes, it may not survive to see the next century.