SEATTLE (Reuters) - Boeing Co (BA.N) appointed a new head of its commercial plane unit on Tuesday, turning to a veteran production expert and salesman to help gain the upper hand in its battle with Airbus for the $100 billion-a-year aircraft market.
The surprise move, just weeks before the Farnborough Airshow, comes as Boeing attempts to ramp up production of its civil aircraft, including the troubled 787, and regain its leading position in the key single-aisle market after losing a large American Airlines AAMRQ.PK order to rival Airbus.
Boeing said Ray Conner would be the new head of its best-known unit with immediate effect, replacing another longtime Boeing executive, Jim Albaugh.
Conner, 57, joined Boeing in 1977 as a mechanic and worked his way up the company’s production, supply chain and marketing operations to become head of sales. Albaugh, 62, who came to prominence at Boeing’s defense unit, is to retire on October 1 - three years before Boeing’s standard retirement age - after 37 years with the company.
The move was greeted positively by industry analysts, who applauded the appointment of a sales-oriented head in place of the engineering-minded Albaugh.
“Commercial aircraft sales is a very customer-centric job,” said Carter Leake, an analyst at BB&T Capital Markets. “Conner is more from true-blue aircraft sales than Albaugh. Arguably Conner has touched more Boeing customers than any person in the entire company.”
One industry source said Albaugh wanted to hand over the reins now so his successor would have a chance to represent Boeing at Farnborough, one of the most important events in the company’s calendar where it will be under pressure to announce new orders.
“Now that production lines are running smoothly, and Albaugh accomplished his stated objectives, it’s a good time to step aside and open the door to increased effort on sales where Conner has most recently focused his attention,” said Stifel Nicolaus analyst Stephen Levenson.
Conner was only recently appointed to his second stint in the top sales job after a shake-up prompted by Airbus EAD.PA marching into core Boeing territory last July and persuading American Airlines to buy 260 of its narrow-body A320s, alongside 200 Boeing 737s.
The 737 is the work-horse for most airlines and Boeing’s biggest cash generator, but Boeing upset some customers by delaying a decision on what to do with its replacement, eventually deciding to follow Airbus and offer a revamped version, called the 737 MAX, instead of building an all-new airplane.
Since the launch of the MAX last August, the quiet-spoken Conner has led Boeing’s rebound in the aircraft market and the company is expected to outsell Airbus this year for the first time since 2006, largely on the back of orders for the MAX.
After Farnborough, Conner must turn his attention to Boeing’s audacious attempt to ramp up production of its revolutionary, carbon-fiber 787 to 10 a month by the end of next year from 3.5 a month now, as well as oversee increased production of 737s and 777s.
In a memo to Boeing employees sent on Tuesday and obtained by Reuters, Conner said he aimed to focus on delivering the planes in Boeing’s bulging order book.
“Our job going forward together in the near term is to stay the course on the product and services strategies that have resulted in our record backlog, and to turn up the gain on performance and execution to ensure we meet our commitments,” said Conner in the memo.
One analyst said Albaugh’s retirement signaled a broader process of management change at Boeing.
“The generational shift in Boeing management is now almost done, with only CEO Jim McNerney left of the old guard,” said Rob Stallard at RBC Capital Markets. “Who succeeds him remains to be seen, but Boeing now has two relatively new and capable executives heading each division, and each could be vying for the top slot in due course.”
Dennis Muilenburg took over as head of Boeing’s defense, space and security unit in 2009, when Albaugh left to take charge at the commercial airplanes unit as the company looked for a steady hand to guide the early production of the troubled 787 Dreamliner program.
With 787 production now stabilized, Albaugh’s retirement is the second high-profile departure after Boeing’s finance chief James Bell retired earlier this year.
Industry-watchers agree that Albaugh achieved that, while he also brought the new 747-8 jumbo to market and presided over an unprecedented labor agreement at Boeing’s volatile Seattle-area plants [ID:nN1E7AT23A].
Albaugh’s support was key to Boeing’s winning back a multibillion-dollar U.S. Air Force contract to build 179 new refueling planes that had been awarded to Northrop Grumman Corp (NOC.N) and its European partner, Airbus parent EADS EAD.PA.
“Realistically, he’s accomplished everything he was trying to do at Boeing Commercial Aircraft,” said defense consultant Loren Thompson at the Lexington Institute.
One senior industry official said Albaugh likely wanted to exit Boeing at the “top of his game.”
“He’s run Boeing defense. He’s run Boeing commercial, and he’s not going to be CEO at Boeing.”
Additional reporting by Tim Hepher in Paris, Karen Jacobs in Atlanta, Andrea Shalal-Esa in Washington and A. Ananthalakshmi in Bangalore.; Editing by Matthew Lewis, M.D. Golan, Richard Pullin and Andre Grenon