The Boeing brand is visible at the Farnborough International Airshow in Farnborough, England, on July 22, 2024. (Credit: Toby Melville/Reuters)
Boeing announced on Friday that it plans to reduce its global workforce by approximately 10%, affecting around 17,000 jobs, and introduce a series of measures affecting its aircraft catalog, as part of efforts to overcome ongoing financial difficulties. In separate announcements, the aerospace manufacturer also revealed further delays in the delivery of its new 777X aircraft and the cessation of 767 cargo production by 2027.
The company expects that its third-quarter results will reflect significant financial burdens, partly due to the ongoing strike involving over 33,000 workers since mid-September. Despite these challenges, Boeing's stock rose 3% on the New York Stock Exchange at the end of the trading session.
Kelly Ortberg, who has been leading Boeing for two months, informed the company's 170,000 employees that the cuts would impact all levels of staff, including management and workers. He mentioned that more information would be provided next week by senior management. The partial furlough measures implemented since Sept. 20 to conserve cash during the strike will be suspended, affecting various employee categories.
The IAM (International Association of Machinists and Aerospace Workers) union members in the Seattle area have halted production at Boeing's two main factories—Renton, which manufactures the best-selling 737, and Everett, which produces the 777 and 767, along with several military programs. Standard and Poor's estimated that the strike is costing Boeing about $1 billion per month.
Negotiations in vain
Currently, the production of the 787 Dreamliner is the only ongoing operation, as the employees at that facility in South Carolina are not unionized. After months of unsuccessful negotiations, including federal mediation, the IAM and Boeing failed to reach a new four-year labor agreement.
Contacted by AFP, the IAM did not immediately respond. “Our company is in a difficult position,” noted Kelly Ortberg in his message. According to him, “re-establishing the group requires difficult decisions, and we must make structural changes to ensure that we remain competitive and serve our customers over the long term”. Adding that Boeing must “focus [its] resources” on its fundamentals, Mr. Ortberg announced that the 777X long-haul jet program would be delayed once again.
According to a press release accompanying his message, the timeline for the 777X program has been pushed back again, with the first delivery of the 777-9 now expected in 2026 (previously 2025) and the 777-8 in 2028. They were originally scheduled to enter service in 2020. Boeing will continue to fulfill orders for the 767 cargo aircraft but will stop commercial production in 2027, while maintaining production of the military KC-46A refueling version.
Boeing anticipates that its third-quarter results, due for release on Oct. 23, will include several billion dollars in charges due to the suspension of the 777X certification process and the impact of the strike on production. “Our business is facing short-term challenges, and we are making important strategic decisions for our future”, said Mr. Ortberg, adding that he had a ''clear vision of the work we need to do to restore the Group.''
The Commercial Aviation Division (BCA) is expected to record a pre-tax charge of $3 billion for the 777X ($2.6 billion) and 767 ($400 million) programs. Quarterly sales should reach $7.4 billion, with an operating margin of -54%.
This charge stems from the suspension of the 777X certification process and, for both programs, from the consequences of the strike. The Defense, Space and Security (DSS) branch will once again be hit by a charge of around $2 billion related to several fixed-cost programs. Sales are expected to come in at $5.5 billion, with an operating margin of -43.1%.
Overall, Boeing forecasts a total revenue of $17.8 billion, with a net loss of $9.97 per share.
As the company grapples with significant production quality issues, particularly highlighted by a January incident involving an Alaska Airlines 737 MAX 9, it remains under close scrutiny from the FAA and is subject to multiple investigations. The IAM announced on X a rally on Tuesday in Seattle. “This is a strong statement to Boeing, the industry and all workers in this country: we will not back down!”
