Boeing would lose more than 90 aircraft orders 1:02
(CNN) --
Boeing is moving its headquarters from Chicago to a Washington suburb, but some analysts believe the move is headed in the wrong direction.
Boeing was headquartered in Seattle from its founding in 1916 until 2001. During its heyday, it was known as an engineering-driven company that made the best and safest airplanes.
But many industry observers felt that reputation was lost when Boeing shifted to results, pointing to its 2001 decision to move headquarters from Seattle to Chicago as a clear sign of that ill-advised shift.
Thursday's announcement that the company will relocate back to Arlington, Virginia, only fuels criticism: By moving in the shadow of both the Pentagon and Congress, Boeing seems to indicate that it lost the trade race to Airbus and that it wants to be seen primarily as a defense and space contractor.
The fact that the announcement comes the same week that Airbus revealed that it will increase production of commercial aircraft at its factory in Mobile, Alabama, only seems to confirm this point.
"One company says, 'We're going to build a lot of planes.' The other says, 'We're going to lobby the Pentagon and Congress for defense dollars.' It's a stark contrast," said Richard Aboulafia, CEO of AeroDynamic Advisory and a prominent aerospace analyst.
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Boeing said in a news release that the move to Arlington is designed to bring the company closer to its "customers and stakeholders, and its access to world-class engineering and technical talent."
"The Road Not Taken"
Aboulafia is not surprised that Boeing has decided to move its headquarters to Arlington, but he is disappointed.
A move to the Seattle area would have sent a strong signal that Boeing is again willing to bet on engineering, he added.
"It would have been great news for morale and it would have shown an intention to focus on its commercial airline products, which are sorely neglected," Aboulafia said.
"Imagine the strength it would have if they said 'let's go back to our roots.' It's just disappointing. It's the path that wasn't taken."
Boeing's engineering and quality problems have posed major challenges for the company.
The accidents of two of the 737 Max planes, in which all 346 people on board died, caused a 20-month standstill of the model.
It was also one of the most expensive corporate mistakes in history, costing Boeing more than $20 billion.
But it has also had problems, delays and financial burdens on almost all of its other passenger planes.
Although the Max has returned to flying to carry passengers in most markets around the world, that has not solved what is perhaps its most serious problem: it has fallen far behind Airbus in sales and deliveries of commercial aircraft, especially in when it comes to single-aisle aircraft.
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Going along with 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 space startups like SpaceX.
Also, moving to suburban Washington doesn't give Boeing much of an advantage, said Ron Epstein, an aerospace analyst at Bank of America.
The company already has nearly 100 lobbyists and a budget of $13.4 million a year, according to the Open Secrets website of the Center for Responsive Politics, which tracks lobbyists.
This figure is the fifth highest of any individual company.
"I don't think anyone can accuse Boeing of not having enough of a presence in DC," Epstein said.
"When I saw the ad, I was a bit surprised. You have to wonder what they gain from it."
It's not just media analysts and critics who question Boeing's culture.
Last week, Domhnal Slattery, CEO of Avolon, one of the world's largest aircraft leasing companies and one of Boeing's biggest customers, suggested the company needs a change in culture and perhaps leadership.
"I think it's fair to say that Boeing lost its way," he told the Airfinance Journal conference in Dublin on Thursday, in comments first reported by Reuters.
"Boeing has a very rich history... They build great planes. But they say culture eats strategy for breakfast and that's what happened at Boeing."
An Avolon spokesman confirmed the comments, though cautioned that Slattery was not speaking specifically about the decision by Boeing headquarters.
Rep. Peter DeFazio, an Oregon Democrat who chairs the House Transportation Committee, also criticized Boeing's move.
"Moving its headquarters to Chicago and away from its Pacific Northwest roots was a tragic mistake that ... gave Wall Street accountants power over the line engineers who built their once-great reputation," he said in a statement.
"Boeing's problem is not lack of access to the government, but rather its continuing production problems and management and board failures that led to the fatal 737 Max accidents."
"Boeing should focus on making safe planes, not putting pressure on federal regulators and Congress," he concluded.
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Some of the company's problems—particularly the hit to airline finances and demand for new planes—were beyond Boeing's control.
Even Boeing CEO Dave Calhoun admits that most of the problems have been self-inflicted.
"I will be the first to admit that these are not events caused by the outside world, but unfortunately internal mistakes," he told investors on a conference call in January.
However, he insisted that Boeing took steps to improve its attention to engineering.
"Our culture is centered on getting as close as possible to our work, from the top of the company to the ranks of engineers," he said.
"I think we're getting a lot better. We're actually getting pretty good at it."
However, beyond the Max and the pandemic, Boeing has other problems to solve.
Quality control problems with its wide-body 787 Dreamliner have forced delivery to be suspended for almost a year.
And certification problems with its new wide-body jet, the 777X, have delayed the planned first 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 taken time and attention away from its original plan to introduce a new long-range single-aisle aircraft to compete with the Airbus A321XLR, which is is selling a lot.
"Virtually all of their programs have suffered a (financial) burden, both commercially and defense-wise," Epstein said.
"It's hard to design and build airplanes. No one is perfect. But Boeing seems to have more problems in its programs than all of its peers. It all goes back to engineering. Will moving to Arlington change the engineering culture in a good way? It's hard to see."
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