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Boeing to cut 17,000 jobs and delay 777X jet as revenues fall short

CEO Kelly Ortberg says third-quarter results will ‘recognise impacts’ of machinists’ strike

 

Boeing said revenues for the quarter would come in at $17.8bn, a figure that would fall short of analysts’ expectations by about 3% © Bloomberg

Boeing said revenues for the quarter would come in at $17.8bn, a figure that would fall short of analysts’ expectations by about 3% © Bloomberg

Boeing will cut about 17,000 jobs and delay the first delivery of its 777X jet as the plane maker confronts deepening losses and the effects of a weekslong strike by its largest labour union.

Chief executive Kelly Ortberg announced the cuts, equivalent to 10 per cent of its workforce, in a message to staff on Friday. “Our business is in a difficult position, and it is hard to overstate the challenges we face together,” he said.

Financial troubles have escalated at Boeing since the start of the year, when a door panel blew off one of its 737 Max jets on a passenger flight. Regulators demanded a slowdown in manufacturing to fix quality problems, which reduced the amount of cash flowing into the company.

Last month, 33,000 workers walked out of Boeing plants in Washington state after members of the machinists’ union overwhelmingly rejected a new contract. The work stoppage halted production of the company’s 767 and 777 planes, further cutting revenue, putting strain on its suppliers and customers.

The debt rating agency S&P this week warned of a possible downgrade of Boeing’s bonds to junk status. Analysts expect the company to look to raise at least $10bn in new equity to shore up its financial position.

In a separate statement after the market closed on Friday, Boeing warned investors that its third-quarter results, which are due on October 23, would “recognise impacts” related to the strike as well as charges in its commercial and defence divisions.

The company said it had $10.5bn in cash and marketable securities at the end of September after burning through $1.3bn in cash during the quarter. Losses for the period totalled nearly $10 a share, in part reflecting pre-tax charges of $5bn in the quarter, including $3bn on the 777X and 767 commercial plane programmes and $2bn for its defence, space and security business.

Boeing said revenues for the quarter would come in at $17.8bn, a figure that would fall short of analysts’ expectations by about 3 per cent.

Ortberg, a former CEO of avionics manufacturer Rockwell Collins, was appointed in late July to replace Dave Calhoun. He arrived soon after Boeing had pleaded guilty to misleading US regulators about a flight control system that caused two fatal crashes of the 737 Max in 2018 and 2019.

Boeing continues to face federal investigations over the 737 Max accident on an Alaska Airlines flight in January, which killed no passengers but led to new questions about quality control inside the company.

The machinists’ strike came after union members turned down the company’s offer of a 30 per cent pay increase. In an attempt to conserve cash, Boeing had begun stopping purchase orders with suppliers, freezing new hiring and furloughing tens of thousands of employees.

Ortberg said that, because of the planned job cuts, the company would not proceed with the next round of furloughs.

Boeing needed “to reset our workforce levels to align with our financial reality and to a more focused set of priorities”, he said, adding that the cuts would include executives, managers and employees. Boeing had 171,000 employees at the end of 2023.

Jon Holden, district president of the International Association of Machinists and Aerospace Workers union, accused Boeing of attempting to negotiate through the press with its announcement.

“They hope to drive a wedge within our union,” Holden said. “There is no chance of that. We are stronger than ever and united on every picket line.”

Ortberg announced that first delivery of Boeing’s 777X jet — which was first due to enter commercial service in 2020 — would be delayed again, from 2025 to 2026.

Boeing shares fell about 0.9 per cent in after-hours trading.

Author: Editors Desk, Zehra Munir and Gregory Meyer in New York

Source: Financial Times

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