Boeing is poised to make significant cuts to its workforce, with plans to lay off 17,000 employees as it grapples with a month-long strike affecting its operations. The company’s forecast indicates a delay of at least a year in the delivery of its highly anticipated 777X jet, alongside projecting losses of nearly $5 billion for the third quarter.
Boeing’s CEO, Kelly Ortberg, emphasized the need for restructuring in a message to employees, stating that the company must adapt its workforce to better fit its current financial landscape. The ongoing strike, which involves around 33,000 workers on the U.S. West Coast, has halted production on critical aircraft including the 737 MAX, 767, and 777 models, pushing the company to realign its priorities and workforce levels.
As a result, Boeing’s stock witnessed a 1.7% dip in after-hours trading following the announcement. Furthermore, the aerospace giant reported significant financial setbacks, accumulating a staggering $5 billion in charges related to both its defense and commercial sectors.
The resolution of the strike holds paramount importance for Boeing. The company filed a charge of unfair labor practices this week, claiming the machinists’ union is not negotiating in good faith. Financial analysts estimate that this strike is costing the company approximately $1 billion each month, raising concerns over Boeing’s investment-grade credit rating as it teeters at risk of downgrade.
Ortberg also indicated that customers have been informed of the postponed expectations regarding the 777X, which is now projected for delivery in 2026. This delay arises not only from the current strike but also from earlier developmental challenges and the recent suspension of flight testing. Boeing has already been under pressure due to technical issues surrounding the 777X’s certification, previously causing major delays.
The company anticipates revealing its third-quarter earnings on October 23, with an expected revenue of $17.8 billion and a projected loss per share of $9.97. Despite facing these pressing challenges, Ortberg reassured stakeholders that the organization is making pivotal strategic decisions to secure its future.
Additionally, Boeing is set to discontinue its 767 freighter program by 2027, once it fulfills its current orders of 29 planes, though production for its KC-46A Tanker will continue uninterrupted. The company confirmed it would also wind down a furlough program initiated in September as part of its workforce strategy.
Prior to the strike initiation on September 13, Boeing had already been enduring cash flow difficulties, exacerbated by an incident involving a mid-air panel blowout that highlighted internal safety lapses, prompting U.S. regulators to impose stringent production limits.
In light of its ongoing financial struggles, Boeing is exploring avenues to bolster its liquidity, including the potential sale of stock and similar equity securities, with estimates suggesting the need to raise $10 billion to $15 billion to uphold market confidence and maintain its credit ratings.
As the company navigates these tumultuous waters, it remains focused on restoring stability and developing a resilient operational framework that can adapt to changing market conditions and regulatory demands.