Whistleblowers, a new CEO and astronauts stranded in space. Is there any hope left for Boeing?

Airline and defense contractor Boeing (BA 0.86%) it has been an iconic representation of American innovation for over a century. When I lived in Washington DC, I often passed Boeing headquarters in Crystal City on my way to work. It was hard not to be inspired by such an incredible deal.

But in recent years, Boeing has been at the center of one negative story after another. The company’s reputation is tarnished, and with so much malaise surrounding the bad press, it’s starting to look like Boeing’s best days are in the rearview mirror.

Let’s take a look at some of Boeing’s headaches and assess why I think investors would be best off avoiding the aerospace stock right now.

1. Whistleblower Concerns

Boeing has been the target of a number of whistleblowers in recent years. Many of these whistleblowers were Boeing employees who publicly expressed concerns about the company’s commitment to safety and quality assurance.

It is no coincidence that whistleblowers have come forward because Boeing has also been the subject of government investigations into some major accidents.

Of course, such events can damage a company’s reputation. But for Boeing, the company is in a unique position. Boeing’s most direct competitor in the airline industry is Airbus. With the big two essentially a duopoly, it will take a lot more than bad press to convince investors that Boeing’s prospects look bleak.

Image source: Getty Images.

2. A CEO replacement probably isn’t a cure-all

Most of Boeing’s revenue is found in three categories: commercial aircraft; defence, space and security; and global services. The commercial aircraft business was once considered Boeing’s bread and butter. However, the company’s results in the first six months of 2024 were not exactly inspiring.

For the six months ended June 30, Boeing delivered 175 commercial jets — a 34 percent year-over-year decline. Of course, commercial airline Boeing’s $10.6 billion revenue was also down 31% from the first half of 2023. While falling revenue is never a good sign, Boeing investors were hit with a double unpleasant as the company’s cash burn continues to rise. . In the first half of 2024, Boeing burned more than $8 billion. With the company’s stock not growing and Boeing ramping up investment in safety protocols, it’s hard to see a narrative where the company returns to accelerating sales growth and consistent profits anytime soon.

About a month ago, Boeing’s board named Robert K. “Kelly” Ortberg as the company’s new CEO. It’s important to note that former Boeing CEO Dave Calhoun announced his plans to step down in March, so it wasn’t too surprising to see Ortberg take over.

While this leadership transition might seem encouraging, I think it will take some time for real change to be integrated at Boeing. Until then, there’s little reason to believe the airline’s core business will return.

3. Ground control for Major Musk?

In June, two astronauts boarded a Boeing Starliner capsule for a space exploration mission. This was a big step for Boeing, as the launch marked the first time the Starliner had sent astronauts to the International Space Station (ISS).

Problem? The crew was supposed to return to planet Earth by now, but got stuck in outer space. NASA and Boeing discovered several mechanical problems, including helium leaks with the Starliner, which delayed the trip back from space. After months of deliberation, NASA has made the decision to bring back astronauts on a SpaceX Dragon spacecraft.

SpaceX is probably Boeing’s biggest competitor in space exploration and is the brainchild of entrepreneur Elon Musk. If this isn’t Musk’s checkmate move on Boeing, I don’t know what is.

The bottom line

Boeing has some real problems in both its commercial airline business and its government defense operations. In addition, Boeing continues to be at the center of safety allegations, poor manufacturing protocols and a questionable road undermined by billions of wasted money.

If you are an investor seeking exposure to the aerospace industry, government contractors or defense businesses, there are many other opportunities. While Boeing may be the most important because of its brand recognition, I see too much risk in investing in Boeing and think it would be best to avoid the stock for now.