Boeing reported a significant quarterly loss of $6.17 billion, its worst in four years, due to hefty charges in its Commercial Aviation and Defense divisions. The company is hopeful for ratification of a new labor agreement to end a strike affecting key plants. The proposed deal could offer workers significant pay raises and bonuses. Boeing’s ongoing struggles, including past crashes and the pandemic’s impact, have resulted in over $31 billion in net losses since 2020.
Boeing faces a significant challenge: the aerospace manufacturer has reported its worst quarterly loss in the past four years, amounting to $6.17 billion. This unfortunate outcome comes as the company seeks validation for a new labor agreement intended to resolve a costly strike that has disrupted operations at two key facilities since mid-September.
– Related read: A tentative agreement reached between Boeing and its employees
The results were not unexpected, as Boeing revealed heavy charges totaling $5 billion in its Commercial Aviation (BCA) and Defense and Space (BDS) sectors, initially disclosed on October 12. Analysts had predicted a loss of approximately $6.12 billion.
Kelly Ortberg, who took the helm in early August, stated, “My mission is clear. To steer this great ship back on course and restore Boeing to the leadership position we strive for.”
Data from AFP indicates that since the start of 2020, Boeing has incurred over $31 billion in net losses, with its largest quarterly deficit recorded at $8.42 billion in Q4 2020.
As of 14:20 GMT, Boeing shares had decreased by 0.90% on the New York Stock Exchange.
The BCA division is grappling with a slowdown in production aimed at enhancing quality, following several years marked by serious errors, including an in-flight incident last January.
The situation has been exacerbated by a strike involving over 33,000 workers in the Seattle area, where Boeing originated in July 1916. This strike has halted production at the company’s two main facilities, which manufacture the 737 (its top-selling model), the 777, the 767, and various military projects.
The local branch of the machinists’ union (IAM) recently announced a tentative agreement “worthy of consideration.” A previous proposal, revealed on September 8, was overwhelmingly rejected by union members, prompting an immediate strike.
The new tentative agreement proposes a 35% pay raise over the next four years (with the IAM initially seeking a 40% increase), reinstatement of a previous annual bonus, enhanced employer contributions to the pension scheme, and a higher signing bonus.
Ratification Process
IAM members are set to vote on the new agreement on Wednesday, with results anticipated later in the day. If ratified, work may resume as soon as Friday.
Jon Holden, president of IAM-District 751, expressed on CNBC on Tuesday, “I believe it will be a close vote.” He added, “If rejected, we will go back to negotiations. Our members will ultimately determine the outcome.”
In his first interview since his appointment, Ortberg shared his optimism about the upcoming vote on CNBC.
Resuming operations is crucial for Boeing. In September, the company managed to deliver 33 aircraft that were completed prior to the strike, but the outlook for the coming months suggests limited output.
Airlines have already experienced scheduling difficulties since 2023, and reduced deliveries lead to diminished revenues — around 60% of payments are made upon delivery — which further strains cash flow.
Boeing has been struggling to regain momentum after the tragic crashes in 2018 and 2019 that resulted in 346 fatalities, along with the impact of the COVID-19 pandemic.
To help stabilize its finances, Boeing implemented measures including a 10% cut to its global workforce, which was nearing 171,000 by the end of 2023.
Ortberg acknowledged on CNBC, “We are overstaffed based on our business outlook,” indicating that prolonged strike actions could lead to further employment repercussions.
To strengthen its cash position, the company has secured an additional $10 billion credit line and is planning to raise up to $25 billion over the next three years.
Experts suggest that this might involve a capital increase of $10-15 billion by late 2024 to early 2025. Analysts at TD Cowen have also pointed to potential divestitures of non-essential assets, estimating around $20 billion in holdings.
According to Ortberg, a portfolio review is currently underway, and it is likely that “rationalization” will be appropriate.
The BDS sector is also challenging Boeing’s financial health, as it has been incurring notable losses from fixed-price contracts with the US government and NASA.
Additionally, regarding the aircraft crashes, Boeing is awaiting a decision from a federal judge on a plea agreement reached in late July, which could help the company avoid a criminal trial. So far, over 90%