Boeing Announces 17,000 Job Cuts, Faces $5bn Loss Amid Ongoing Strike

Boeing is set to eliminate 17,000 jobs, representing 10% of its global workforce, delay the first deliveries of its 777X jet by a year, and record $5 billion in losses for the third quarter.

These significant measures came as the U.S. aerospace giant grapples with the impact of a prolonged strike that has halted production of key aircraft models.

In a message to employees, Boeing CEO Kelly Ortberg stated the workforce reduction is necessary “to align with our financial reality” as the company faces financial pressures.

The ongoing strike, involving 33,000 workers on the U.S. West Coast, has disrupted production of Boeing’s 737 MAX, 767, and 777 aircraft.

Ortberg also highlighted that Boeing has notified customers of the delayed 777X deliveries, now expected in 2026, citing development challenges, flight-test pauses, and the work stoppage.

The 777X program had already faced delays due to certification issues. Despite these setbacks, Ortberg emphasised, “While our business is facing near-term challenges, we are making important strategic decisions for our future and have a clear view on the work we must do to restore our company.”

Boeing’s third-quarter earnings report, set for release on October 23, would reflect the company’s struggles.

In a separate statement, Boeing projected revenues of $17.8 billion, a loss per share of $9.97, and a negative operating cash flow of $1.3 billion—significantly better than the $3.8 billion cash burn analysts had expected.

The company has also recorded $5 billion in pre-tax earnings charges for its defense business and two commercial plane programs. This financial strain prompted the company to dismiss Ted Colbert, head of its space and defense unit, on September 20.

As Boeing faces escalating losses, analysts warn of the potential implications. Thomas Hayes, an equity manager at Great Hill Capital, suggested that the announced layoffs may increase pressure on striking workers to reach a resolution.

“Striking workers who temporarily do not have a paycheck do not want to become unemployed workers who permanently do not have a paycheck,” Hayes said in an email.

He predicted the strike could be resolved within a week, as workers aim to avoid being part of the upcoming job cuts.

Boeing’s management has also filed an unfair-labor-practice charge with the National Labor Relations Board, accusing the machinists’ union of failing to negotiate in good faith.

The strike has already cost the company $1 billion a month, according to a report from S&P, and risks further damaging its investment-grade credit rating.

In another blow, Boeing announced that it would end its 767 freighter program in 2027, after delivering the remaining 29 aircraft on order. However, production of the KC-46A Tanker will continue.

The International Association of Machinists and Aerospace Workers (IAM), which represents the striking workers, expressed concern over the decision to halt the 767 program, stating that it would assess the implications.

The IAM also responded to Boeing’s filing with the NLRB, describing the accusations as baseless. According to Jon Holden, president of IAM District 751, Boeing’s decision to take negotiations public was “detrimental to the bargaining process” and would only prolong the strike. He emphasised the union’s stance that Boeing should return to the negotiating table.

Boeing has been struggling with cash flow even before the strike, exacerbated by previous issues like the mid-air panel blowout on a new aircraft that exposed safety lapses and led to regulatory restrictions.

Adding to its legal troubles, the company is facing a court hearing in Texas, where a judge will decide whether to accept Boeing’s plea deal with the Justice Department.

Under this deal, Boeing has agreed to pay $487.2 million in fines, invest $455 million in safety improvements, and face three years of court-supervised probation.

Amid this turbulence, Boeing may also seek to raise additional funds to stabilise its finances. Sources familiar with the situation suggested the company might explore selling common stock, mandatory convertible bonds, or preferred equity to raise around $10 billion.

Boeing currently carries $60 billion in debt and posted over $7 billion in operating cash flow losses during the first half of 2024.

Analysts believe Boeing would need to raise between $10 billion and $15 billion to maintain its credit rating, which is just one notch above junk status. A partner at Running Point Capital Advisors, Michael Ashley Schulman, said the delayed 777X and labor downsising was anticipated.

He warned, however, that “their credit rating and share price have been at risk for the better part of a decade because of mismanagement, and the stubbornness displayed in the strike may be the straw that breaks the camel’s back.”

Boluwatife Enome

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