12-10-2024 (WASHINGTON) Aerospace giant Boeing has announced drastic measures to address its mounting financial woes, including cutting 17,000 jobs globally and delaying the delivery of its highly anticipated 777X jet. The company, grappling with a month-long strike and ongoing production issues, expects to record a staggering $5 billion loss in the third quarter of 2024.
In a sobering message to employees, CEO Kelly Ortberg outlined the necessity of these sweeping changes, stating, “We must reset our workforce levels to align with our financial reality and focus on a more targeted set of priorities.” The job cuts, representing approximately 10% of Boeing’s global workforce, will affect all levels of the company, from executives to frontline workers.
The announcement sent ripples through the financial markets, with Boeing’s shares dropping 1.1% in after-hours trading. This latest development marks a significant challenge for Ortberg, who took the helm in August with promises to mend fences with the union and employees.
The ongoing strike by 33,000 US West Coast workers has severely impacted Boeing’s production capabilities, bringing the manufacture of its 737 MAX, 767, and 777 jets to a standstill. In response to the labour dispute, Boeing has filed an unfair-labour-practice charge with the National Labor Relations Board, accusing the machinists union of failing to bargain in good faith.
The financial implications of the strike are severe, with ratings agency S&P estimating that it is costing Boeing $1 billion per month. This financial strain has put the company’s coveted investment-grade credit rating at risk.
Adding to Boeing’s troubles, the company has announced a further delay in the delivery of its 777X aircraft. Citing development challenges, a pause in flight testing, and the ongoing work stoppage, Boeing now expects the first 777X delivery to occur in 2026. This setback compounds existing certification issues that had already significantly delayed the aircraft’s launch.
In a move that signals a shift in Boeing’s long-term strategy, the company also announced the end of its 767 freighter program in 2027, after completing the remaining 29 ordered planes. However, production of the KC-46A Tanker will continue.
The International Association of Machinists and Aerospace Workers (IAM), representing the striking workers, expressed concern over the 767 freighter program’s discontinuation and dismissed Boeing’s claims against the union as groundless. IAM District 751 President Jon Holden criticised Boeing’s approach, stating that attempts to bargain through the press “won’t work and are detrimental to the bargaining process.”
As Boeing navigates these turbulent times, the company faces additional scrutiny. A court hearing in Texas will decide whether to accept Boeing’s offer to plead guilty to fraud under a deal with the Justice Department, potentially resulting in substantial fines and heightened oversight.
The company is also exploring options to raise billions of dollars through stock sales and equity-like securities, with some sources suggesting a target of around $10 billion. With approximately $60 billion in debt and significant operating cash flow losses in the first half of 2024, analysts estimate that Boeing may need to raise between $10 billion and $15 billion to maintain its credit ratings.
