Boeing is facing significant challenges, including job cuts, delayed deliveries, and financial losses as a result of a month-long strike by 33,000 U.S. West Coast workers. CEO Kelly Ortberg announced that the company will cut 17,000 jobs and record $5 billion in losses in the third quarter. Shares of Boeing fell by 2.12% in after-market trading following the announcement. These sweeping changes are an attempt to align the company’s workforce with its financial reality and focus on key priorities.
Analysts believe that the layoffs could put pressure on striking workers to end the strike, as they may not want to risk permanent unemployment. Boeing is hoping to resolve the strike quickly to minimize the impact on its operations. The company has recorded pre-tax charges of $5 billion for its defense business and two commercial plane programs. Boeing now expects to report revenue of $17.8 billion, a loss per share of $9.97, and an operating cash flow of $1.3 billion for the third quarter.
Boeing filed an unfair-labor-practice charge against the machinists union on Wednesday, accusing them of failing to bargain in good faith. The strike is estimated to be costing Boeing $1 billion per month, putting the company’s prized investment-grade credit rating at risk. The company has also informed customers that it anticipates the first delivery of its 777X jet to be delayed until 2026 due to development challenges, a flight-test pause, and the work stoppage. Boeing had already been facing certification issues with the 777X which had caused significant delays to the aircraft’s launch.
Boeing plans to end its 767 freighter program in 2027 once all remaining orders have been completed and delivered, while production for the KC-46A Tanker will continue. In response to the job cuts, the company has decided to end a furlough program for salaried employees that was announced in September. Prior to the strike, Boeing had been experiencing cash burn due to challenges stemming from a January mid-air panel blowout on a new plane that revealed safety issues and led regulators to reduce production.
To address its financial challenges, Boeing is exploring options to raise billions of dollars through a sale of stock and equity-like securities. The company may sell common stock, mandatory convertible bonds, and preferred equity, potentially raising around $10 billion. With approximately $60 billion in debt and operating cash flow losses exceeding $7 billion for the first half of 2024, analysts believe Boeing may need to raise between $10 billion and $15 billion to maintain its current credit ratings just above junk status.
