Aerospace & Defense

Boeing fires CEO Dennis Muilenburg, as the company struggles with 737 Max crisis

Key Points
  • Boeing says it replaced CEO Dennis Muilenburg, effective immediately.
  • Chairman David Calhoun will become the manufacturer's CEO in January.
  • Lawrence Kellner is tapped as chairman.
  • The company has been struggling to regain the trust of regulators, customers and the public after two fatal crashes of its bestselling plane, the 737 Max.
Boeing CEO Dennis Muilenburg is stepping down—Here's what four experts say it means for the company and stock

Boeing ousted CEO Dennis Muilenburg, saying Monday it replaced him with the company's chairman as the nation's biggest manufacturing exporter struggles to regain the trust of regulators, customers and the public in the wake of two fatal crashes of its bestselling plane, the 737 Max.

Muilenberg stepped down immediately, and Chairman David Calhoun, 62, will become CEO on Jan. 13.

Boeing declined to comment on Muilenburg's severance, but a filing earlier this year showed he could be eligible for around $39 million.

The shakeup comes as Boeing has flailed in its attempts to contain one of the biggest crises in its more than 100-year history, disrupting relationships with the very airline customers that fueled Boeing's sales boom in recent years to the pilots who have complained about broken trust. Airlines have lost millions of dollars in revenue and have curbed their growth without access to the fuel efficient planes, which regulators grounded in mid-March. 

Earlier this month, the Federal Aviation Administration took the rare step of publicly admonishing Boeing for pushing an unrealistic timeline for the planes' return to service and for appearing to pressure the regulator. The two crashes — in Indonesia in October 2018 and in Ethiopia last March — claimed 346 lives. A flight-control program has been implicated in both crashes, and regulators haven't yet signed off on software changes for the planes, forcing airlines to rejigger their schedules well into 2020.

Dennis Muilenburg out as Boeing CEO

What did Muilenburg in was repeated claims that regulators would return the plane to service in the fourth quarter and a dressing down in Washington by FAA administrator Steve Dickson, according to people familiar with the matter.

Boeing acknowledged that concerns about trust led to the change. 

"The Board determined that a change in leadership was necessary to restore confidence in the company moving forward and that we will proceed with a renewed commitment to full transparency, including effective and proactive communications with the FAA, other global regulators and our customers," CFO Greg Smith, who became interim CEO, said in a note to employees, announcing the changes.

Boeing shares gained nearly 3% on Monday after Boeing announced the changes but are still down 20% since the second 737 Max crash in March.

The FAA declined to comment on Muilenburg's firing but said the agency continues to work with other international aviation safety regulators to review the proposed changes.

"Our first priority is safety, and we have set no time frame for when the work will be completed," the agency said in a statement.

"We expect that Boeing will support that process by focusing on the quality and timeliness of data submittals for FAA review, as well as being transparent in its relationship with the FAA as safety regulator," it said.

Dave Calhoun, Chairman of Boeing
Adam Jeffery | CNBC

The resulting turmoil from the two crashes has consumed Boeing. The two crashes sparked numerous investigations, including a federal criminal probe, about the aircraft's development and certification by the Federal Aviation Administration in 2017. Earlier this month, Boeing said it would suspend production of the 737 Max early next year, the latest sign of how the crisis is rippling through the company's supply chain.

It has also sparked anger among pilots and flight attendants. Pilots for example, weren't told about flight-control software that was implicated in both crashes, until the Lion Air plane went down in October 2018.

"No matter who is in charge, we have the same expectations and we'll remain an advocate for our passengers no matter what the name tag says," said Dennis Tajer, spokesman for the Allied Pilots Association, which represents roughly 15,000 American Airlines pilots including more than 4,000 737 pilots. "Management changes alone don't rebuild trust, actions rebuild trust."

Sara Nelson, president of the Association of Flight Attendants which represents some 50,000 cabin crew, including United called Muilenburg's resignation "long overdue" and blamed the planes' failures partially on pressure on Boeing to deliver returns to investors.

"Safety must always come first," said Nelson. "Thousands of other families are worried about their ability to provide for their loved ones. It is not right that the good people on the frontlines of Boeing are hurting and facing uncertainty because of failed leadership. Our members are experiencing this same uncertainty as airlines jettison flight plans."

Boeing had for months resisted calls to replace Muilenburg. The board removed him as chairman in October saying he could better focus on bringing the Max back to service, a process that has been delayed by additional questions from regulators. Earlier this month, the FAA's chief said he would not rule out fining Boeing for failure to make disclosures about the 737 Max.

Muilenburg, an engineer, became CEO in 2015 and had been with the company since he was an intern.

Boeing replaced the head of its commercial airplane unit, Kevin McAllister, shortly after removing Muilenburg as chairman. Stan Deal, a three-decade Boeing employee who most recently led its global services business, replaced McAllister.

In addition to the Max problem, Boeing suffered a major embarrassment this weekend with its Starliner space capsule. Its autonomous flight control system fired at the wrong time shortly after launch, putting Starliner in the wrong orbit. A planned docking with the International Space Station to deliver supplies had to be aborted. The craft did safely return to Earth on Sunday.

Calhoun has been on Boeing's board since 2009. In October, he took on the role of non-executive chairman. Calhoun has been a senior managing director at Blackstone, and previously worked at General Electric for more than two decades, including a stint as head of its aircraft engines business.

Larry Kellner, a former CEO of Continental Airlines,  will become chairman. He has been on Boeing's board since 2011. Since 2010, he has been the president of private equity firm Emerald Creek Group.

-CNBC's Phil LeBeau contributed to this report.