Rishabh Mosalpuria
Boeing has announced the plan for laying off 10% of their workforce. Boeing President and CEO Kelly Ortberg recently shared a message with his employees announcing the future plans including some difficult decisions and several program updates. The message stated that the 777X program will be delayed due to development challenges, flight test pause and ongoing work stoppage, and now expect their first delivery in 2026. After the completion of remaining orders of 767 Freighters, the commercial program will be concluded in 2027. However, the production for the KC-46A Tanker will continue. Along with this a plan to reduce the size of total workforce by roughly 10 percent in upcoming months to meet the financial reality is shared. The message stressed on the safety, quality and delivery of the products.
The company is currently facing strike from their workers. In recently announced preliminary third quarter results, the company acknowledged the consequences it is facing due to the charges for certain programs across the Commercial Airplanes and Defense, Space & Security segments and the work stoppage by the International Association of Machinists and Aerospace Workers (IAM). The company said that they will will recognize impacts to their financial results related to these issues in their third quarter results on October 23. The company expects to report third quarter revenue of $17.8 billion, GAAP loss per share of ($9.97), and operating cash flow of ($1.3) billion. A total of $10.5 billion in cash and investments in marketable securities at the end of the quarter.
Analysts at stock market predict that Boeing might sell between $10 billion and $15 billion new shares to cover for the losses. Analysts also predict that Boeing might try to reconcile with the protesting workers before issuing the new shares in the market. Issuance of new shares in market will lead to a dip in the prices of Boeing’s shares. However, Boeing has not commented anything over the subject of selling new shares to cover up losses.
The crisis of the Boeing started with its 737 MAX 8 aircraft. Back-to-back crashes of Lion Air Flight 610 in October 2018 and Ethiopian Airlines Flight 302 in March 2019 raised safety concerns over company’s operations. Boeing then had to ground entire global fleet of 371 737 MAX aircraft. The situation got even worse with the Covid-19 pandemic. The pandemic reduced airline passenger traffic, which impacted the demand for new commercial airplanes and services, with airlines delaying purchases for new jets, slowing delivery schedules and deferring elective maintenance. To tackle these losses, Boeing offered a $25 billion bond offering to raise the capital in May 2020, rejecting additional funding through the capital markets or the U.S. government at that time. While the offering saw strong investor demand, it impacted the company’s finances, increasing its debt load and interest expenses.
In June 2024, Boeing made Starliner spacecraft was launched with two NASA astronauts, Sunita Williams and Barry Wilmore. It soon began posing issues like helium leaks and thruster issues while planning for return to earth. In August 2024, NASA announced that the astronauts would return to Earth on a SpaceX Dragon spacecraft in February 2025, instead of the Starliner, citing safety concerns. Thus, the Starliner would return to Earth empty. It impacted the brand image of Boeing furthermore amid aviation crisis.
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Airbus, the major competitor of Boeing, on the other hand initiated its share buyback programme to support its future employee share ownership plan activities and equity-based compensation plans. The programme will take place in open market and will start from 9 September 2024 and will go on until 31 March 2025. It will be executed by an investment firm, which will be independent for the timing of the purchases.
Boeing’s President and CEO Kelly Ortberg highlighted the severe challenges facing the company, emphasizing the need for “tough decisions” and structural changes to stay competitive and serve customers long-term. Ortberg noted that the company must be “clear-eyed about the work we face” and focus on core areas to avoid “underperformance and underinvestment.”
IAM Air Transport Territory General Vice President Richie Johnsen addressed striking workers, calling it the largest strike in the US. He stated, “IAM members are taking this fight directly to Boeing management. Members are totally united and solidly behind their IAM union negotiations team.” He expressed pride in the workers’ efforts, noting, “You are fighting not just for yourselves, but the entire labor movement.” He assured, “The IAM Air Transport Territory with its 100,000 members solidly support you.”
The current financial scenario doesn’t look optimistic for Boeing and the company will hope to raise its share prices again along with solving the issues within the company’s operations and management.
