Boeing Fires CEO Dennis Muilenburg After Months-Long 737 MAX Crisis; Shares Gain

Boeing has dismissed CEO Dennis Muilenburg just days after the world's biggest planemaker said it would miss its own deadline for recertification of the grounded 737 MAX.
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Boeing Inc (BA) - Get Report  said Monday that Dennis Muilenburg will step down from his role as CEO of the world's biggest planemaker with immediate effect.

Muilenburg, 54, will be replaced by David Calhoun, who took on Muilenburg's chairmanship earlier this year, starting on January 13. Greg Smith, Boeing's CFO, will serve as interim CEO during the transition period, the company said.

Muilenburg's departure, after four-and-a-half years at the helm, comes just days after the world's biggest planemaker said it would miss its own deadline for recertification of the grounded 737 MAX.

"On behalf of the entire Board of Directors, I am pleased that Dave has agreed to lead Boeing at this critical juncture," said Boeing board member Lawrence Kellner. "Dave has deep industry experience and a proven track record of strong leadership, and he recognizes the challenges we must confront. The Board and I look forward to working with him and the rest of the Boeing team to ensure that today marks a new way forward for our company."

Boeing shares were marked 2.5% higher in early Tuesday trading immediately following the company's leadership change release to change hands at $336.29 each.

Last week, Boeing said it would indefinitely suspend production of its grounded 737 MAX jet after failing to meet a self-imposed target for its recertification from the Federal Aviation Administration.

Boeing reached its decision late Monday following a two-day board meeting in Chicago that came after the FAA's chief administrator, Steve Dickson, cautioned that multiple milestones need to be met before the MAX could be granted clearance.

Boeing had tabled a December return for the workhorse jet, which was grounded last spring following two fatal crashes over a five-month span between 2018 and 2019 that killed 346 people in Ethiopia and Indonesia and has cost the company more than $9 billion. 

"We believe this decision is least disruptive to maintaining long-term production system and supply chain health," Boeing added. "This decision is driven by a number of factors, including the extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals, and the importance of ensuring that we can prioritize the delivery of stored aircraft."

The planemaker said earlier this month that it booked 30 new orders for the 737 last month, much of which came from the Dubai Airshow in the United Arab Emirates, with Turkey's Sun Express buying 10 737 MAX 8 planes, while an unidentified customer --reportedly Kazakhstan's Air Astanta 00 signed up to buy 20 more 737s.

Boeing also said it would increase costs related to the grounded 737 MAX by around $900 million, taking the total to around $3.6 billion, but noted at the time that it forecast production rising from 42 planes a month to 57 planes per month by the end of 2020.

It is clear that the FAA has been frustrated with Boeing's pressure and public statements regarding the MAX," said Cannacord Genuity analyst Ken Herbert. "Boeing is still looking to complete several of its key milestones soon, but this has taken longer than expected."

"While Boeing has not indicated that the pause will be in place until the successful return to service, at a minimum it will want better visibility on the key milestones, including the JOEB training requirements," he added. "Moreover, it is likely Boeing will gradually "wake-up" the factory after the pause, and it could take several months to get rate back to the 42/month level."