Boeing moves headquarters to Washington and indicates change in business focus

Boeing is moving its headquarters from Chicago to a suburb of Washington, DC. But some analysts think this move is in the wrong direction.

The company was based in Seattle from its founding in 1916 to 2001. During its heyday, it was known as an engineering company that made the best and safest planes.

But many industry observers felt that reputation was lost when Boeing shifted to focus on results — and they point to the 2001 decision to move headquarters from Seattle to Chicago as a glaring sign of that reckless shift.

The company’s announcement last Thursday that it will move once again, this time to Arlington, Va., only fuels critics: By moving into the shadow of the Pentagon and Congress, Boeing appears to be signaling that it has lost the commercial race to Airbus and wants to be seen primarily as a defense and space contractor.

The fact that the announcement comes the same week that Airbus revealed it is ramping up production of commercial jets at its factory in Mobile, Alabama, only seems to underscore this point.

“One company is saying, ‘Let’s build a lot of jets.’ The other is saying, ‘Let’s put pressure on the Pentagon and Congress for defense dollars.’ It’s a stark contrast,” said Richard Aboulafia, managing director of AeroDynamic Advisory and lead aerospace analyst.

Boeing said in a press release that Arlington’s move is designed to bring the company closer to its “customers and stakeholders, and their access to world-class engineering and technical talent.”

“The path not taken”

Aboulafia is not surprised that Boeing has decided to move its headquarters to Arlington, but he is disappointed.

A move back to the Seattle area would have sent a strong signal that Boeing is once again ready to embrace engineering, he added.

“It would have been great for morale and showing intent to focus on the much-overlooked commercial airline products,” Aboulafia said.

“Imagine the power if they said ‘Let’s go back to our roots.’ It’s just disappointing. It is the path not taken.”

Boeing’s engineering and quality problems posed major challenges for the company. The crashes of two of the 737 Max jets that killed all 346 people aboard the flights led to a crippling 20-month grounding of the plane.

It was also one of the most costly corporate mistakes in history, costing Boeing more than $20 billion. But it also had problems, delays and financial burdens for almost all of its other passenger jets.

While the Max is back in the air carrying passengers in most markets around the world, that may not have solved its most serious problem: the company has lagged well behind Airbus in commercial plane sales and deliveries, particularly among single-aisle jets. .

Getting closer to the Pentagon and Congress could help Boeing in its defense and space businesses, but even in those fields it is struggling to keep up with other defense contractors like Lockheed and Raytheon, as well as upstart space companies like SpaceX.

Also, moving to suburban DC doesn’t do Boeing much good, said Ron Epstein, an aerospace analyst at Bank of America.

The company already has about 100 lobbyists and a lobbying budget of $13.4 million a year, according to the Open Secrets website of the Center for Responsive Politics, which monitors lobbying. This is the fifth highest number of any individual company.

“I don’t think anyone would accuse Boeing of not having enough presence in DC,” Epstein said. “When I saw the ad, it was a little scary. You have to ask, what does that mean for them?”

It’s not just analysts and media critics who are questioning Boeing’s culture. Last week, Domhnal Slattery, CEO of Avolon, one of the world’s leading aircraft leasing companies and a major Boeing customer, suggested that the company needs a change in culture — and perhaps leadership.

“I think it’s fair to say that Boeing has lost its way,” he said at the Airfinance Journal conference in Dublin on Thursday, in comments reported by Reuters.

“Boeing has a storied history… They build great planes. But they say culture eats strategy for breakfast, and that’s what happened at Boeing.”

An Avolon spokesperson confirmed the comments, although he cautioned that Slattery was not speaking specifically about the Boeing headquarters decision.

Representative Peter DeFazio, an Oregon Democrat who chairs the House Transportation Committee, also criticized Boeing’s decision.

“Moving its headquarters to Chicago and away from its Pacific Northwest roots was a tragic mistake that gave Wall Street bean accountants power over the line engineers who built their once-great reputation,” he said in a statement.

“Boeing’s problem is not its lack of access to government, but rather its ongoing production problems and the management and board failures that led to the fatal 737 Max crashes.”

“Boeing should focus on making planes safe — not putting pressure on federal regulators and Congress,” he concluded.

Some of the company’s problems — particularly the blow to airline finances and the demand for new planes — were beyond Boeing’s control. Even Boeing CEO Dave Calhoun admits that most of the problems were self-inflicted.

“I will be the first to admit that it was not events caused by the outside world, but unfortunately internal errors,” he told investors on a January conference call.

Still, he insisted that Boeing had taken steps to improve its attention to engineering.

“Our culture is focused on getting as close to our work as possible, from the top of the company to the engineering level,” he said.

“I think we’re getting a lot better. In fact, we’re getting pretty good at it.”

In addition to Max and the pandemic, however, Boeing has other problems to solve. Quality control issues with its widebody 787 Dreamliner forced delivery to be put on hold for nearly a year.

And certification issues for its newest widebody, the 777X, have pushed back the first planned delivery of the passenger version by two years, to at least 2025.

Meanwhile, Boeing’s attempts to fix all its problems with the Max, 777X and Dreamliner have diverted time and attention from its original plan to create a new long-range single-aisle jet to compete with the Airbus A321XLR.

“Pretty much all of their programs have received a financial charge, and that’s commercial and defense,” Epstein said.

“It’s a difficult thing to do, design and build aircraft. Nobody is perfect. But Boeing appears to have more problems with its programs than any of its peers. It all comes back to engineering. Is the move to Arlington changing the engineering culture in a good way? It’s hard to see.”