New York (AFP) – Boeing will be under a spotlight Wednesday as the beleaguered aviation giant announces what is expected to be its biggest quarterly loss in four years, and striking employees vote on whether to end a costly weeks-long stoppage. The ugly financial results, which the company telegraphed earlier this month, will be announced by Boeing and newly installed CEO Kelly Ortberg before the stock market opens. Later Wednesday, some 33,000 hourly workers in the Seattle region will vote on whether to end the company’s latest contract offer and end their nearly six-week strike.
On October 11, as part of an announcement of layoffs and other belt-tightening measures, Boeing signaled it expects a huge quarterly loss due to billions of dollars in one-time costs, including a large hit from the strike by the International Association of Machinists (IAM) and Aerospace Workers. Analysts estimate a loss of $6.1 billion, according to Factset, its biggest since the fourth quarter of 2020. Even before the strike, Boeing had slowed production in its commercial plane division to ensure greater attention to safety protocols after a 737 MAX flown by Alaska Airlines was forced to make an emergency landing in January when a fuselage panel blew out mid-flight.
The near-catastrophe — coming after two fatal 737 MAX crashes in 2018 and 2019 that claimed 346 lives — put Boeing under greater regulatory oversight. The strike has now halted work at two Seattle-area assembly plants that produce its 737 MAX and 777 planes. Last week, Boeing supplier Spirit AeroSystems said it would furlough staff as a result of the stoppage.
The latest Boeing contract offer includes a 35 percent pay rise over four years and a one-time signing bonus of $7,000. However, the deal does not restore the pension, a major sticking point for older workers. Jon Holden, president of the Seattle-based union, told CNBC on Tuesday he expects a “tight” vote. The strike has cost an estimated $7.6 billion in direct losses — including at least $4.35 billion for Boeing and almost $2 billion for its suppliers, according to the Anderson Economic Group consultancy. Holden told CNBC he is prepared to return to the bargaining table if members reject the contract again. “We’ll continue to push for the things our members say are important and we’ll continue to strike,” he said. “That’s our only option and our members will make that choice.”
Boeing was still able to deliver 33 new aircraft in September. However, the company has signaled there will be fewer deliveries in the coming period, denting revenues. Faced with a worsening financial outlook, Boeing under Ortberg, who joined the company on August 8, announced last month that it will cut 10 percent of its workforce, or about 17,000 positions. The company also pushed back the first delivery of the 777X to 2026 from 2025. The much-delayed jet was originally supposed to enter service in January 2020.
On October 15, Boeing announced it plans to raise up to $25 billion to navigate the period, saying in a regulatory filing that it will raise funds by selling stock and debt on top of $10 billion in new credit agreements with banks. TD Cowen has estimated that Boeing could raise $20 billion by selling non-strategic assets. Boeing is also still dealing with legal fallout from the MAX crashes. A Texas federal judge is weighing a US Department of Justice accord that includes a guilty plea from the planemaker. Some family members of MAX victims have asked the court to reject the deal and prosecute Boeing. Boeing also still faces multiple civil cases related to the crashes. The company has settled with about 90 percent of the plaintiffs.
The multitude of challenges facing Boeing make it “akin to a Greek hero, a company once held up as an example of American greatness …who’s now in crisis brought on by many of their own decisions,” said a recent note from Bank of America that posited it will take a “Herculean effort” to right things. “Hercules on his path of redemption took 12 years to complete his trials and eventually ascend to Olympus,” the report said. “Here too we see Boeing on a path which could take a decade to fully restore their former glory.”
© 2024 AFP
