Key Points
- During an ongoing strike, Boeing will cut 17,000 jobs, or 10% of its workforce.
- The company expects $5 billion in losses for the third quarter and delays 777X deliveries until 2026.
- Boeing faces regulatory scrutiny and legal challenges and plans to raise $10-15 billion to maintain its credit rating.
- The labor strike, costing $1 billion monthly, has halted production of several key aircraft models.
Boeing announced on Monday that it will cut 17,000 jobs—about 10% of its global workforce—as part of its restructuring plan in response to ongoing financial challenges. This decision comes amid a strike by 33,000 U.S. West Coast workers that has halted production of key aircraft models, including the 737 MAX, 767, and 777 jets. Boeing CEO Kelly Ortberg said the job cuts are necessary to align the company’s workforce with its financial reality.
In a message to employees, Ortberg explained, “We are resetting our workforce levels to align with our financial situation and more focused priorities. Over the coming months, we plan to reduce the size of our total workforce by approximately 10%, affecting executives, managers, and employees alike.”
Boeing’s production stoppage and labor strike have significantly impacted the company’s financial performance. The aerospace giant expects to record $5 billion in losses for the third quarter of 2024. It also plans to delay the first deliveries of its 777X jet by a year, pushing them to 2026 due to developmental challenges, the flight-test pause, and the ongoing strike. Boeing shares fell 1.1% in after-market trading following the announcement.
The job cuts and operational delays come as Boeing struggles with a labor strike that began on September 13. According to S&P, the strike is costing the company an estimated $1 billion per month and putting its investment-grade credit rating at risk. Thomas Hayes, an equity manager at Great Hill Capital, said the layoffs might push workers to resolve the strike quickly, as striking employees risk losing their jobs permanently.
Boeing also faces legal challenges and scrutiny from regulators. The company is scheduled to appear in a Texas court to address fraud charges related to safety protocols, with potential penalties of up to $487.2 million. In addition, a national watchdog has criticized the Federal Aviation Administration (FAA) for ineffective oversight of Boeing’s production practices.
To manage its financial strain, Boeing is considering raising $10 billion to $15 billion through stock sales and other securities to maintain its credit ratings. With about $60 billion in debt, Boeing posted cash flow losses exceeding $7 billion in the first half of 2024.
Despite these challenges, Ortberg remains optimistic, stating, “While our business faces near-term challenges, we are making important strategic decisions to restore our company.”
