In an effort to save money, Boeing announces layoffs and aircraft delays, despite continuing to incur billions in losses from a month-long strike that is becoming worse every day.
The 33,000 machinists’ strike entered its second month on Sunday, adding to Boeing’s year of extreme upheaval as the aeroplane manufacturer battles to overcome safety issues and lower output. According to new estimates, the corporation, its supplier partners, and airline consumers are all paying more and more for that ongoing struggle.
A research by the Michigan-based consulting firm Anderson Economic Group estimates that Boeing has already lost close to $5 billion as a result of the strike that stopped almost all of its passenger aircraft manufacturing. According to CNN Sunday, that estimate includes $900 million for suppliers as well as $3.7 billion in missed revenue and shareholder payouts. These comprise over half of Boeing’s 12,000-person component and supply chain network, which consists of around 6,000 small enterprises.
The numerous eateries, shops, and other establishments that surround closed Boeing plants in the Seattle region and depend on business from both firm employees and its partners are not included in those numbers.
“Part of the cost is being borne by suppliers, companies in the Seattle area, and Boeing customers,” Anderson Economic Group CEO Patrick Anderson told CNN. “We now factor in much greater losses to other Seattle-area businesses and to customers who depend on Boeing’s parts and services in our week-by-week projections.”
Even if those enormous expenses are concerning enough on their own, their quick growth has made them even more so. According to Anderson’s original estimate from more than two weeks ago, Boeing and suppliers only lost $1.05 billion and $114 million, respectively, as a result of the strike. The latest analysis that CNN quoted places the total cost of the fight to far at $285 million, but that study did not provide a figure.
What was once a serious issue for Boeing has become an increasingly serious existential danger as a result of the labour conflict.
A side panel of one of its best-selling 737 MAX aircraft burst away at 16,000 feet last January, sparking the company’s problems. After the event, the Federal Aviation Administration inspected the firm and found persistent deficiencies in its production safety protocols, one of which was the reason for the mid-air drama in January.
Boeing’s aircraft deliveries and revenue have been restricted as a result of a subsequent necessary overhaul of the company’s whole production system and a ban on 737 MAX output. As a result, Boeing reported $33 billion in first-half losses in June, along with a growing debt load of about $60 billion.
Rating agencies have threatened to lower the company’s credit rating to junk status since the strike has essentially stopped even earlier manufacturing under the 737 MAX limit. That may make it impossible for a lot of institutional investors, such as pension funds, to own its stock. The threat could have played a role in Boeing’s decision on Friday that it will lay off 17,000 workers, or 10% of its workforce.
The unexpected choice could have been made to appease the ratings agencies with the impression of restructuring, even as it fights the machinists’ union over its requests for a 40 percent raise in worker compensation over the next four years. But before that relegation can happen, the corporation is allegedly thinking of issuing new shares to raise around $10 billion in capital as a buffer against a potential decline in its credit to junk status.
Some onlookers saw the rush of disparate actions as both frantic and random.
According to Nick Cunningham, an analyst at Agency Partners LLP in London, “it’s all getting a bit hand to mouth,” Bloomberg said. “It isn’t really a logical plan. because they represent current and emerging issues and are not part of a restructuring.”
Boeing said on Friday that it was stopping manufacturing of its 767 cargo aircraft and delaying the launch of its 777 X passenger jet until 2026, citing outward indications that it is attempting to organise its extremely chaotic home. These actions further enrage airlines that have been waiting for the 777 since its initial 2020 delivery date and leave holes for competitor Airbus to fill.
Among them was Tim Clark, the CEO of Emirates, who was blunt in expressing his weariness and tolerance with Boeing’s problems.
In light of the ongoing strike, Clark mocked Boeing’s new 2026 delivery promise for the 777, saying, “Emirates has had to make significant and highly expensive amendments to our fleet program as a result of Boeing’s multiple contractual shortfalls and we will be having a serious conversation with them over the next couple of months.” “I don’t understand how Boeing can predict delivery dates in any meaningful way.”
Other observers of Boeing have expressed astonishment at the company’s strong stance against striking employees, notably the past week’s withdrawal of its counterproposal to increase pay rates by 30% over four years.
According to some calculations, Boeing would have to spend an additional $1 billion annually if it were to provide the union the entire 40 percent it seeks. However, other observers point out that, given the urgency of starting up production and making money to just remain afloat, it represents a slight rise in costs.
Regarding the additional labour expenses, RBC Capital Markets analyst Ken Herbert told Bloomberg, “It’s not a needle mover in terms of Boeing profitability.” “Why are we here waiting? It becomes more disruptive and a financial burden with each passing day.
But for the time being, Boeing is remaining hard and bargaining as if it were a powerful corporation completely in control, rather than a heavily indebted company losing billions of dollars each week due to a strike that might lead to bankruptcy.
