President, Chief Executive Officer & Director, Boeing
Boeing CEO on Deliveries, Demand, Next-Gen Aircraft
Boeing Co. Chief Executive Officer Kelly Ortberg discusses plans to ramp up production, demand and the outlook for artificial intelligence and robotics in aircraft manufacturing. Ortberg talks with Bloomberg's Guy Johnson at the Farnborough Airshow.
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About Robert Ortberg
Boeing CEO Kelly Ortberg said the company is "turning the corner" but has not yet "finished turning the corner," citing progress in production ramp-ups and a strong backlog. He stated that the company needs "another couple of years" to improve cash flow and pay down debt before it can commit to developing a next-generation aircraft, noting that the market is not yet ready and customers are focused on existing product maturity. Ortberg described the new Air Force One as "the most complex twin-aisle aircraft that we've ever done," adding that the design phase is complete and the company is "confident" in the build. Ortberg confirmed that Boeing will start production on a new 737 Max assembly line in Everett on July 6, moving from 42 to 47 aircraft per month. He said the company is "not going to push airplanes out the door if we're not stable" and that key production metrics have been "pretty good." On regulatory trust, Ortberg noted that the FAA recently restored full certification authority, which he called a "signal of our regaining trust with our regulator." He attributed the company's execution focus to its own efforts, while acknowledging that the Trump administration has been "very helpful" to the aerospace industry through trade policy and sales campaigns.
Transcript (40 segments)
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Interviewer0:00
Yes. Kelly Ortberg is here at Farnborough, the CEO of Boeing. Great to see you.
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Robert Ortberg0:05
Good to see you. Thanks for taking the time.
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Interviewer0:07
Look, Kelly, you're two years in. Nearly two years in. As CEO of Boeing Company feels like it's in much better shape. The share price is well off its lows. You take a whole load of boxes. Other priorities beginning to change. It feels like a company that's kind of shifting to offense, to getting on the front foot.
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Robert Ortberg0:25
Well, we're turning the corner. I tell my team we haven't quite finished turning the corner. We've got more work to do, but I am pleased with the progress so far. We're ramping up production across many of our product lines. Markets are very strong. Our backlog is very, very strong. So our story is really focusing on executing that backlog.
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Interviewer0:45
Okay. The administration, the White House is giving you massive support over the last 18 months. The president certainly had your back. Do you think the company would be where it is now, that kind of progress that you've made without that kind of support?
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Robert Ortberg1:02
Well, I think the execution focus is really on us to go improve our overall performance, build trust with our stakeholders, restore trust with the regulator. And I think that's more what Boeing has done for themselves. The president has been very helpful in sales campaigns, balancing trade. The best way to do that is by a bunch of airplanes. And so we've been a beneficiary. He's been very helpful to the whole aerospace industry.
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Interviewer1:26
So you're in a good place right now. So what's now?
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Robert Ortberg1:28
Well, we still have to ramp up higher. So we're at 47 a month now on the 737. We have aspirations to get to 63 a month. We're at 8 a month rate on the 787. We want to go to ten later in the year and then higher next year. So we're investing in new capacity, new facilities so that we can continue this rate ramp. The backlog is there. The market is strong. So it's all about delivering more airplanes.
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Interviewer1:56
You say the backlog is there. The market is strong. You like the economy right now? The consumer looks good, particularly in the states. The consumer wants to fly. The airlines are certainly saying that. But you've got Brent this morning at 90 bucks a barrel. You've got the ongoing conflicts with Iran. Just give me your flavor of what you're seeing in front of you in terms of what the macro picture looks like.
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Robert Ortberg2:17
It's a super resilient market. While we see perturbations here or there, regional perturbations which we're seeing now, we forecast that the market is going to continue to be strong. Traffic continues to grow. We just came out with the new forecasts for overall aircraft growth, and we see 44,000 airplanes in the next 20 years. So this isn't a market that moves quickly because you have to make orders for aircraft well in advance. And we think that the demand is set for our aircraft going forward.
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Interviewer2:51
One of the things that's certainly driving the economy right now is the AI boom. A lot of money is being spent.
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Robert Ortberg2:56
Yeah, I think it's going to be worth it. AI is critically important to us. We're working with AI to improve our back office processes, help us with our design processes, whether it's software or hardware designs, and also embedding AI capability in our services and our actual product going forward. So I think AI is going to really change the way we do our work, and hopefully we can go faster and provide better products as a result of it.
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Interviewer3:26
One of the things that often goes hand in hand with the AI story is the robotic story. I'm convinced robotics feels like Boeing is a perfect place for maybe that advanced robotics to find a home. What do you see in the future for that? Can you build airplanes without people? What impact is it going to have? What does it do in terms of your ability to build?
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Robert Ortberg3:46
Today we use robotics to help us build the aircraft, but the real opportunity to really utilize robotics is going to be when we go to a next aircraft, because in many cases, you have to change the design to allow for the automation. And I think that the real step function in automation will come with the next generation aircraft.
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Interviewer4:05
Okay. We'll come on to when that is in just a moment. But in terms of how you utilize that, how much of the aircraft do you think you can build? How automated do you think this process?
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Robert Ortberg4:18
Oh, I think we can make a step function in automation. It depends on what particular area of the aircraft. But certainly we can automate the whole assembly of the aircraft in a big way.
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Interviewer4:30
Okay. You bring up the issue of the next generation of aircraft. What am I going to say? You don't know yet.
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Robert Ortberg4:36
The market is not quite ready for the new airplane. The customers are telling us, let's focus on the existing product. We'd like to see better durability of that product in the marketplace. And as I mentioned, we've got big backlogs and they're looking for us to deliver on those backlogs. We are studying the new airplane, and we'll be ready when the market is ready.
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Interviewer4:56
So this is the replacement for the current 737 in that narrow body end of the spectrum? Your friends in Toulouse think early next decade. Do you think that's a little early?
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Robert Ortberg5:13
I think the market will tell us what the right thing is. It's not today. Whether it's the end of the next decade, we'll see.
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Interviewer5:18
Are you in a position now that you could make that happen?
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Robert Ortberg5:22
Probably not now. Financially, I'd say we need another couple of years as we ramp up our production, improve our positive cash flow, and pay down some debt. That's our plan, and we're accomplishing that plan. So in a couple of years, we'll be ready to take on that challenge. I don't think the market's going to quite be ready in a couple of years. But we'll again see. We want to be ready when the market's ready.
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Interviewer5:43
Okay. But your sense is that that's at the back end of next decade?
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Robert Ortberg5:50
Yeah. In that neighborhood, I think so.
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Interviewer5:52
Okay. Let's talk about engines. We'll do current engines and maybe future. Let's start with the future engines. Larry Culp over at GE tells me that it's going to be an open fan system, unlike the jet engine that's flying over us right now. Have you made a decision on what you think the next engine is going to be? Because this is going to be kind of critical to what that aircraft is going to look and feel like.
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Robert Ortberg6:14
No, we haven't made the decision on exactly what the next engine is going to be. We're studying all sorts of technology, including the GE technology you're talking about, and we'll make that decision at the appropriate time.
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Interviewer6:27
Okay. Let's talk about defense because it feels like for the first time I can remember a long time, Farnborough feels like it's more focused on defense and the outlook on that side than it is maybe on the civil side. Can Europe rearm and do what it needs to do without the big American prime contractors, the OEMs like Boeing? Can it do that? Europe wants to do its rearmament program with its own capability. Do you think that's possible?
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Robert Ortberg6:57
I think in certain areas it's possible and it's going to take time. And so I think that we're going to still have opportunities to participate in the market as that capability gets built up here. I don't think that they can afford to do it everywhere. So they're going to have to pick their spots. What we think is we'll have to partner more to address the markets in Europe. And we're willing and ready to do that.
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Interviewer7:17
What does that look like?
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Robert Ortberg7:20
Well, it looks like joint ventures, partnerships. We're partnered with Rheinmetall, for example, to bring the MQ-28 into Germany. We're partnered here in the UK on trainer aircraft. So that's what that looks like, partnerships with in-country companies that have capability. And we can bring our capability and address this market.
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Interviewer7:40
Do you think there has been a paradigm shift? Do you think that we are in a new world now in terms of the long term trend? Europe has not prioritized its defense industry for many years. Has that now changed?
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Robert Ortberg7:51
Yeah, I think it has. Budgets have increased significantly. And as budgets increase, the opportunity will increase. So I think it will take time. And our plan is to work with countries and companies to address the market as the market transitions.
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Interviewer8:03
Does that mean M&A or does that mean the partnerships that you're talking about?
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Robert Ortberg8:09
I think it's predominantly partnerships right now. May lead to M&A later. But I think for right now it's mostly going to be partnerships.
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Interviewer8:17
Where do you see the opportunity for Boeing?
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Robert Ortberg8:19
Really all of our product lines, I think, have applications. Whether it be our rotary wing platforms, our E-7 platform is another important program here in the UK, our MQ-28, our training airplane. So we've got a lot of applications where that capability just doesn't reside standalone here in Europe. So I think we can partner with European countries and companies and bring that capability into the market.
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Interviewer8:46
And in terms of where the challenges lie within that, over the last few years, we spent a lot of time talking about the civil supply chain. Does the same problem exist in defense?
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Robert Ortberg8:57
Yeah, in many cases, the defense supply chain is pretty common to the civil supply chain when you get down to the tier two and tier three. So we are in an environment where both markets are growing at the same time, and that's going to constrain the supply chain. And we're spending a lot of effort and money helping our supply chain be ready as we grow. They've got a lot of work yet to do because rates are going to continue to increase at both Boeing and our competitors.
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Interviewer9:25
So just to wrap things up, you feel like the company is in a good place. We've got earnings coming up in the next few days. But in terms of what you have delivered thus far, you are comfortable that you've made the progress that you've needed to make.
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Robert Ortberg9:37
Yeah. Absolutely. Absolutely. We're making progress. I feel good, our employees feel good. Our customers are feeling better about the Boeing Company. Our regulator, if you just saw just recently, gave us delegation for certifying our commercial airplanes. So we're restoring that trust step by step. And I feel really good about where we are.