The introduction of its new 777X jet, which was originally set for 2025, has now been delayed until 2026. Furthermore, Boeing is set to halt the production of the cargo variant of its 767 aircraft by 2027, after completing existing orders.
Roughly 17,000 employees impacted
In light of persistent financial losses and production issues stemming from a strike that has significantly hindered operations, Boeing is preparing to lay off about 10% of its workforce, impacting roughly 17,000 employees. The company’s new CEO, Kelly Ortberg, communicated the forthcoming layoffs to employees in a memo sent on Friday, October 11, 2024. These job reductions will span across various levels, including executives, managers, and staff members. Boeing currently employs close to 170,000 individuals worldwide, with key manufacturing sites located in Washington and South Carolina.
Why is Boeing opting for layoffs?
Boeing has been struggling with financial issues for several years, having incurred losses exceeding $25 billion since 2019. To cope with its labor costs, the company initially implemented rolling furloughs, but these measures will be halted in light of the forthcoming layoffs. The layoffs coincide with Boeing’s announcement of delays and alterations to its production strategies. The launch of the new 777X jet, which was first slated for 2025, is now postponed to 2026. In addition, Boeing plans to discontinue production of the cargo version of its 767 aircraft by 2027, following the completion of current orders.
Ending 767 Program in 2027
The financial challenges have been worsened by an ongoing strike involving approximately 33,000 union machinists, who have been striking since September 14. This strike has severely disrupted the production of Boeing’s top-selling aircraft, including the 737 Max, 777, and 767 models. Despite two days of negotiations earlier this week, no agreement was reached, prompting Boeing to file a charge of unfair labor practices against the International Association of Machinists and Aerospace Workers.
Boeing projects a $1.3 billion loss in the third quarter
Boeing’s preliminary financial results for the third quarter depict a dire situation. The company reported a cash outflow of $1.3 billion for the quarter and a loss of $9.97 per share, which is significantly worse than what industry analysts had predicted. Analysts had anticipated a loss of $1.61 per share, but Boeing’s financial outcomes were adversely impacted by several substantial write-downs, including $2.6 billion related to the 777X delays, $400 million for the 767, and $2 billion connected to its defense and space initiatives. These costs involve expenses related to new Air Force One jets, a NASA space capsule, and a military refueling tanker.
As of September 30, Boeing had $10.5 billion in cash and marketable securities. The complete financial results for the third quarter are expected to be published on October 23. The strike has significantly contributed to Boeing’s financial woes, as the company typically receives a substantial portion of payment for its aircraft at the time of delivery. The production halt due to the strike has intensified cash flow issues, particularly for the 737 Max, 777, and 767 models, although Boeing continues to manufacture 787s at its nonunion facility in South Carolina.
Ortberg, who assumed the role of Boeing’s CEO in August, is responsible for guiding the beleaguered company during these challenging times. In his memo, he recognized the difficulties ahead, emphasizing that Boeing must implement “structural changes” to maintain its long-term competitiveness. As the company continues to encounter heightened scrutiny from regulators, including the Federal Aviation Administration, Ortberg’s leadership will be vital in shaping the future direction of the organization.
Triggers of challenges
Boeing is facing a multitude of challenges, worsened by legal disputes tied to the 737 MAX aircraft. A judge in Texas reviewed arguments on Friday regarding a proposed agreement between Boeing and the U.S. Department of Justice related to the 737 MAX, which was grounded after two tragic crashes in 2018 and 2019. Family members of those who perished in the crashes are urging the court to dismiss the settlement, advocating for criminal charges against Boeing and its leadership.
The IAM strike has halted operations at two Boeing assembly facilities in the Seattle region. Union members are demanding significant wage hikes and the restoration of their pension plan, pointing to stagnant wages over the last decade amidst increasing inflation, according to the report.
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