Boeing's Strategic Turnaround Under Kelly Ortberg: A Buy Opportunity in a High-Conviction Aerospace Recovery Play?

The aerospace industry is at a pivotal inflection point. After years of turbulence marked by production delays, safety scandals, and financial hemorrhaging, Boeing is navigating a high-stakes turnaround under CEO Kelly Ortberg. Since assuming the helm in August 2024, Ortberg has spearheaded a radical shift in Boeing's operational philosophy, corporate governance, and supply chain strategy. For investors, the question is whether these reforms are sustainable and whether they position Boeing to capitalize on the broader aerospace recovery and surging global defense demand.

Operational Reforms: From "Growth at All Costs" to "Quality First"

Ortberg's most transformative move has been the adoption of a "fix first, produce later" strategy. This approach prioritizes resolving systemic issues in Boeing's production processes and quality control before ramping up output. For example, the 737 MAX program, once a symbol of Boeing's reckless cost-cutting, now operates at 38 aircraft per month, with plans to incrementally increase to 42 by year-end 2025. Similarly, the 787 Dreamliner's production has risen from five to seven units monthly, with a long-term goal of 14 per month. These gradual increases are designed to avoid the bottlenecks and rework that plagued Boeing in the past.

The shift has already yielded tangible results. Boeing's second-quarter 2025 net loss narrowed to $612 million, a stark improvement from the $1.4 billion loss in the same period in 2024. Investors should note that this progress is not just a function of reduced production but a reflection of improved operational discipline. Ortberg's emphasis on transparency—such as his candid congressional testimony in April 2025—has also helped rebuild trust with regulators and customers, a critical factor in regaining market confidence.

Supply Chain and Governance: Mitigating Risk, Aligning Incentives

A key vulnerability in Boeing's previous strategy was its reliance on high-risk, fixed-price contracts with suppliers, which led to costly overruns in projects like the KC-46 tanker. Ortberg has reversed this trend by shifting to cost-plus contracts, which align supplier incentives with Boeing's long-term goals. This change, coupled with a disciplined approach to supplier collaboration, has stabilized the supply chain for critical programs.

Corporate governance reforms have also been central to the turnaround. Ortberg's relocation of leadership to Boeing Commercial Airplanes (BCA) in Seattle—away from the politically charged environments of Chicago and Arlington—signals a commitment to operational focus. Leadership changes, including the appointment of industry veteran Jesus "Jay" Malave as CFO and the removal of underperforming executives, have further reinforced accountability. A 10% workforce reduction (17,000 jobs globally) has streamlined operations, though it remains a contentious issue.

The recent $8 billion acquisition of Spirit AeroSystems, expected to close in Q3 2025, is another strategic move. By integrating the world's largest aerostructures provider, Boeing aims to reduce reliance on third-party suppliers and enhance manufacturing capabilities. However, the success of this integration will depend on maintaining supply chain stability—a challenge given Boeing's history of production bottlenecks.

Defense Sector: A Growing Pillar of Resilience

While Boeing's commercial aviation struggles are well-documented, its defense business has emerged as a bright spot. The U.S. Department of Defense's $849.8 billion 2025 budget has fueled demand for advanced systems, and Boeing has secured key contracts, including a major win for the Air Force's next-generation fighter jet. This positions Boeing to benefit from the global defense spending surge, which is projected to exceed $2.4 trillion by 2025.

However, the defense sector is not without risks. A labor strike at Boeing's defense facilities in August 2025—its first in nearly three decades—has disrupted production of critical assets like the F-15EX and F/A-18 Super Hornet. With over 3,200 workers from the International Association of Machinists and Aerospace Workers (IAM) involved, the strike highlights vulnerabilities in Boeing's labor relations. Competitors like Lockheed Martin and Northrop Grumman, which have avoided major labor disputes, are gaining market share.

Long-Term Outlook: Cyclical Recovery or Sustainable Growth?

The aerospace industry is entering a cyclical upturn, driven by AI-driven MRO services, fleet modernization, and urban air mobility (AAM) innovations. Airbus projects global air traffic to grow at 3.6% annually until 2044, with Asia and the Middle East leading the charge. For Boeing, the challenge is to sustain its recent momentum while addressing lingering issues in commercial aviation.

Ortberg's reforms have laid a foundation for long-term stability, but execution remains critical. The integration of Spirit AeroSystems, the resolution of the defense labor strike, and the successful certification of new aircraft models like the 777X will be key tests. Investors should also monitor Boeing's debt-to-equity ratio (0.75x as of Q2 2025), which remains higher than peers like Lockheed Martin (0.35x).

Investment Thesis: A High-Conviction Play with Caution

Boeing's strategic turnaround under Ortberg presents a compelling case for long-term investors. The company's focus on quality, supply chain discipline, and defense growth aligns with favorable industry trends. However, risks such as labor volatility, integration challenges, and competitive pressures in the defense sector cannot be ignored.

For those with a high-risk tolerance, Boeing offers a unique opportunity to capitalize on the aerospace recovery. A diversified portfolio that includes Boeing alongside more stable defense contractors like Lockheed Martin or Northrop Grumman could balance exposure to growth and resilience. Investors should also consider Boeing's stock valuation, which remains depressed relative to its historical multiples, as a potential catalyst for upside.

In conclusion, Boeing's strategic reforms under Kelly Ortberg are a necessary but not sufficient condition for long-term success. While the company is on a path to recovery, investors must weigh the potential rewards against the risks of execution gaps and industry headwinds. For those who believe in the durability of Ortberg's vision and the broader aerospace cycle, Boeing could be a high-conviction buy—but patience and a long-term horizon will be essential.