WHEN: Today, Wednesday, January 29, 2020
WHERE: CNBC’s “Squawk Box”
The following is the unofficial transcript of a FIRST ON CNBC interview with Boeing CEO Dave Calhoun and CNBC’s Phil LeBeau on CNBC’s “Squawk Box” (M-F 6AM – 9AM) today, Wednesday, January 29th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2020/01/29/watch-cnbcs-full-interview-with-boeing-ceo-david-calhoun.html.
All references must be sourced to CNBC.
BECKY QUICK: Let’s get to our very own Phil LeBeau. He is standing by in Chicago with Boeing CEO Dave Calhoun.
PHIL LEBEAU: Thank you, Becky. Dave, I’m glad that we could join you just minutes after you guys report Q4 numbers. We’re not going to hash over all the numbers, but I want to ask you about the 737 Max charges. You’re taking a number of them and future costs being counted in, the total is now 18.6 billion. Are you confident that that’s the last of the big charges or are you being a little conservative here?
DAVE CALHOUN: I’m as confident as a CEO can be. Let’s not talk about the specific buckets of the charges. The most important thing underlying it is, do we believe we can meet the certification timeline that underlies that? And the answer is yes. As we looked at that schedule, and as I listened to the FAA and all the constituencies who have an interest in all of this, including the training dimension associated with it, we put together a schedule we think we can make. Not easily. It requires a lot of execution. It requires a lot of discourse, a lot of back and forth with the FAA and the certification process. But we think we have been realistic about that as we laid out this timetable. And we can’t do anything more than that.
PHIL LEBEAU: You know already, and I’m sure that you heard this, some people are saying mid-year. We’re already hearing some fairly encouraging comments from the head of the FAA as well as those involved in the process. And some people are already saying, ‘Look, I think he’s the new CEO. He’s sandbagging. He’s throwing out a date later this year and we could see the Max back in service sooner than that.’ Do you -- what do you think when you hear that?
DAVE CALHOUN: No, of course not. No, you can’t sandbag in a situation like this. I have to answer to our employees, I have to listen to our employees. I simply have to give them the time they need to do the natural discourse that occurs in a big, complex certification process. And that’s what we have provided for. Nothing more, nothing less. So, I believe that we can do it. And the only other comment, and I will always make, is I do not, and I will not control this timeline. So mid-year is what we believe we can do. I appreciate the comments that came from Steve. On the other hand, if he changes those comments in a month, we change our schedule. Simple as that.
PHIL LEBEAU: Steve Dickson is who you’re talking about.
DAVE CALHOUN: Yes.
PHIL LEBEAU: The head of the FAA. We’ll talk more about that in a bit. But the one question that has come up over the last three weeks, you’ve heard the suggestion from people that, ‘Look, they’re not going to get the Max back. Just scrap it all together.’ And the fundamentals of this program have been questioned. I know from our conversations that bothers you, because you believe in this airplane.
DAVE CALHOUN: Totally.
PHIL LEBEAU: Why do you believe in it? Why should people have confidence in the Max?
DAVE CALHOUN: If we didn’t believe that we were going to build an airplane that was safer than the safest demonstrated airplane that’s out there today, we wouldn’t do it. That’s what the FAA wants, that’s what Boeing wants, is a fundamentally sound airplane. The scrutiny it is getting now, the tests are exhaustive, the documentation is clear, the training recommendations are as robust as they could possibly be. If I didn’t believe in all of that process, if our people on the ground didn’t believe it, I wouldn’t be sitting here in front of you today with a schedule like we have laid out.
PHIL LEBEAU: Steven Udvar-Házy, a long-time veteran of this industry, Chairman of Air Lease Corp, who has said, ‘Look, you know, I’m not sure that this plane should remain the 737 Max. The name should be dropped completely.’ You have called that idea silly. Why?
DAVE CALHOUN: Well, I’m not going to market my way out of this. Right? So, yeah, I love Steve. I was with him a couple of days ago. And he is right, in the sense that the Max has something attached to it today. But again, we believe this airplane is safer than the safest airplane flying today. Every next airplane has to be that way. It has to be that way for Boeing. It has to be that way for our competitors. So, what we call it, trying to relabel it, trying to merchandise that, no. This plane will recover with the flying public when airplane pilots step on it, fly it, like it. And by the way, based on all the test flights we have had to date which are many, they do. So, as all of those pilots return, so will passengers.
PHIL LEBEAU: Still no guidance for 2020 and you won’t be giving that until you have certainty in terms of Max production. You can say, ‘Okay, we know in this quarter we’ll build this many.’ But firing up that assembly line is not as simple as saying ‘Let’s go.’ It’s going to take time to wake it up. Correct?
DAVE CALHOUN: Exactly. And the plan that we laid out, the cost that we have described, that amount to the numbers that you accurately portrayed, provide for a very steady one at a time delivery. Remember, we emptied the line.
PHIL LEBEAU: Yeah. It’s shutdown – it’s quiet right now.
DAVE CALHOUN: So, we don’t just start it up and we’re all of a sudden delivering airplanes. We start it up one station at a time. We made the decision to keep our employees, so that the employees that start back up on that line, start warm. That’s the job they were doing. That’s the job they will do. All in the name of stability, safety. We’re going to do this one airplane at a time.
PHIL LEBEAU: Joe, you’ve got a question here for Dave.
JOE KERNEN: I do. So, Dave, recently there’s another software glitch, it was spotted. And there seems to be two schools of thought on more pilot involvement or more automated systems for commercial airliners. And I think the President weighed in, you know, nobody flies anymore. Boeing seemed to even double down on going more automated systems. Is that still the current thinking, that you want to move further and further away from a pilot having as much influence on the flight of the plane?
DAVE CALHOUN: Yeah, that’s a very complex subject. And it’s a very important one. And I would suggest with respect to every next new airplane, post the recertification of this airplane, that decision and the guidance and the regulations that come out of the FAA are going to have to answer that question. It is – it is sort of clear to me that more automation will be required as we move forward, to prevent situations like this that occurred. But I’m not completely sold on that. There is a big school that believes more flying time, more experience is in the best interest of the flying public. So, I’m not going to try -- I’m not going to answer that question too decisively. I think that I know which direction it’s going. But we’re going to have to work very closely with the global regulators to answer it before the next airplane is developed.
BECKY QUICK: Hey, Dave, I’m not sure that I understood the answer. I realize that you can’t answer all of it right now. But it sounded to me like you were leaning toward more automation because of what happened in the situation. But I’d argue the automation caused this to begin with. It could have been pilot problems on top of that, but it was the MCAS system that started the whole thing.
DAVE CALHOUN: Yeah, I’m not sure that I agree with that conclusion, Becky. And I don’t want to answer the big question about how much pilots should fly or not on the basis of the MCAS experience and those instances. In those instances, we wish MCAS was different and it didn’t add to the complexity to that boundary condition that caused the problem. So, we wish that hadn’t happened. And the changes that we made to the flight control system now and it being certified today would not have created that instance. So, I don’t want to infer that it was automation that caused those instances. I think in those cases we didn’t get it right, in a boundary condition that some inexperienced pilots had to deal with. That’s a Boeing problem, and a very specific and discrete problem.
ANDREW ROSS SORKIN: Hey, Dave. To the extent that investors and analysts are going to be watching you today, looking through these numbers, listening to this interview, and be saying, effectively, ‘Do I trust this guy? Do I trust the numbers he’s putting out? Not that the numbers are inaccurate but the confidence that he has or doesn’t have in when things are going to happen or not going to happen.’ My question to you is what things changed for you? What were the lessons since frankly we saw you on our air back in November and you had confidence in your predecessor and in the expectations of when this plane was going to get back?
DAVE CALHOUN: Andrew, listen, it’s a great question. It’s a question that hits me head on every time that I’m with audience, internal or external. You, the media, my customers, our employees, they will judge me every step of the way here. I’m not going to predict that it’s going to be perfect. But what I will do is I will put realism into every one of our assessments, every step of the way and I will listen to everybody that’s involved directly in the process. And as I listen, and I help them resolve the anxieties they may have at any point in time during that process, everybody will gain confidence. I believe that. And we do need confidence, as we launch this airplane. But the underlying engineering in the air plane, the demonstrated performance, outside of that one moment when boundary conditions were not provided for, I believe in this airplane. I believe in the engineering of it. I believe in all the fundamentals. And we can get this exactly right. As I said before, if we didn’t believe or if anybody in this process didn’t believe we were going to field an airplane that’s safer than any in air plane in the sky, we wouldn’t do it.
JOE KERNEN: Hey, Dave – how would you—
PHIL LEBEAU: Dave, I have to ask you—
JOE KERNEN: Oh, sorry—
JOE KERNEN: Go ahead. Go ahead, guys.
JOE KERNEN: I was just going to say: Dave, how would you characterize the current relationships with your customers in the major carriers? Is it cordial? Is it -- are they asking for more information? Do you speak to them a lot? Do you dread speaking to them? Where does it stand with how that’s going with all your biggest customers?
DAVE CALHOUN: Well, listen I do know them. And I have known them for quite some time. And I would never describe our discussions today as cordial. They are very direct. But they are incredibly supportive of the Boeing company and the products that we field. So, they just want us to get back on track. They simply want us to get back where production is stable and predictable. They get their airplanes exactly when they need them. I think we have handled that discussion as well as it could be handled. Maybe with not quite as much transparency, and I think getting back to Andrew’s question, I think transparency, of the lessons I have learned over the last year, that is where Boeing fell short. And we will not fall short on that subject under my leadership. It will be uncomfortable, but we will be transparent on every subject, whether it’s training, whether it’s the certification process, everything along the way. Leadership, culture, all of those things are fair game. I get it. But you’ll know when I know.
PHIL LEBEAU: Dave, let me ask you about culture. Because when you saw those emails and you have known about the emails, but when you released them, I think the public looked and this and they said: Look, you have got some employees who are calling the Max, ‘A plane designed by clowns, supervised by monkeys. I wouldn’t fly on it.’ A) What was your reaction the first time that you saw those messages?
DAVE CALHOUN: Stomach turned. Just like yours would. Just like anybody’s would. So, I don’t want this to get confused. So, I believe that that kind of language, and the IMs that were disclosed—and I wish they had been disclosed inside the company a long time ago, not while we’re in the midst of recovery three years later—that language is horrible. It existed. Trying to indict the rest of the Boeing culture on the basis of those few, I won’t go that far, but somehow, someway, leadership allowed that to happen. That’s unacceptable. And it can’t be allowed to happen in the future. And anybody who sees it, has to be willing to raise their hand, talk to leadership of the company, and then we have to be decisive about it.
PHIL LEBEAU: I know Becky has got a few last questions before we wrap this up. Becky, go ahead.
BECKY QUICK: Well, just a follow up on that, Dave. I mean, you were Chairman at the time. When did you find out about the messages? And was it Dennis Muilenburg’s decision alone to not release the messages sooner?
DAVE CALHOUN: Becky, we found out way too late. There was only one moment in time that if we had found out, we all would have done something. And that is the day it was written. So, it’s the, ‘Who found out later?’ and every one of us involved in that process believe we found out too late. We agree with all of that. And were we as transparent as we needed to be when we did find out? No. On the other hand, none of that really matters relative to the culture and safety process we employ. We had to find out about that the day it was written. And then we had to take action quickly, so that then we would have been ahead of all of this. And maybe we would have had a different recommendation with respect to training. Anyway, I can’t rewrite history. I wish I could. But I think that’s the point.
PHIL LEBEAU: One last question here, Dave. China, the coronavirus as it continues to spread here. Are you concerned about a long-term impact in terms of A) Travel to China, which is the world’s largest market? And B) As they look into the future about ordering more aircraft, you haven’t had an order from China since 2017. Does this have any lasting impact?
DAVE CALHOUN: Yeah, I don’t think so. First, you know, I’m sorry for what’s going on. I will say the experience with SARS in a much earlier timeframe and the protocols that were established, I believe will contain this at a much faster rate than it would have otherwise contained it, without that experience. And I believe all those protocols will get perfected as we deal with this. So, everybody is doing everything they can to support those protocols, to limit ultimately the number of people effected. But I don’t believe it will have a long-term effect. It didn’t before, and I don’t believe it will, going forward.
PHIL LEBEAU: And, with the China trade deal, at least Phase One, close to being finalized, are you optimistic that you may get an order from China?
DAVE CALHOUN: Yes, I am. I’m very optimistic.
PHIL LEBEAU: Will we see it this year, likely?
DAVE CALHOUN: I’m not going to predict that, because that’s up to the Chinese. We will do everything in our power to get that order, to reestablish the great relationship that we have, and we do. And I believe their need for aircraft is significant. So, yes, I believe the trade deal will need to some significant orders.
PHIL LEBEAU: Dave Calhoun, President and CEO of Boeing joining us first on CNBC, just moments after the company releases Q4 earnings. A loss of 233. But it’s the charges and the cost of the Max that’s going to get a lot of attention today. Guys back to you.
ANDREW ROSS SORKIN: Dave Calhoun, thank you for that. And Phil LeBeau, thank you for bringing us that interview.
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