October 12th 2024.
Boeing, one of the world's leading aircraft manufacturers, has announced that it will be reducing its workforce by 10%. This amounts to 17,000 jobs being cut as the company faces ongoing challenges such as an ongoing strike and concerns over the safety of their planes.
In a memo to staff, the company's new chief executive Kelly Ortberg shared that executives and managers will also be affected by the layoffs. Boeing currently employs around 170,000 people worldwide, with a significant portion working in their manufacturing facilities in Washington and South Carolina in the United States.
The company has been struggling financially, having lost over $25 billion since the beginning of 2019. In an effort to cut costs, they had previously implemented temporary furloughs. However, with the new layoffs, these furloughs will now be suspended. Additionally, the launch of their new plane, the 777X, which was planned for 2025, will now be delayed until 2026. Boeing also announced that they will stop building the cargo version of their 767 jet in 2027 after fulfilling current orders.
The ongoing strike by around 33,000 union machinists, who are demanding better pay, has been a major factor in Boeing's financial struggles. Despite two days of talks this week, a deal has not been reached and the company has filed an unfair labor practices charge against the International Association of Machinists and Aerospace Workers.
Aside from financial issues caused by the strike, Boeing has also been dealing with quality and safety concerns in recent years. The company has faced multiple incidents, including two fatal crashes in 2018 and 2019, which claimed the lives of 346 people. Both crashes involved the Boeing 737 Max and resulted in a 20-month grounding of the plane, costing the company over $21 billion. In addition, Boeing was fined $487.2 million by the US Justice Department for fraud related to deceiving the Federal Aviation Administration about the crashes. They were also ordered to invest at least $455 million to improve safety.
In January of this year, a Boeing 737 Max owned by Alaskan Airlines experienced a serious incident when a door panel came off shortly after takeoff, forcing the plane to make an emergency landing. As a result, the US Federal Aviation Administration temporarily grounded all 737 Max 9 planes. There have also been two separate incidents in the US where wheels have come off Boeing planes shortly after takeoff.
These safety concerns have led to a decrease in orders and investments for Boeing. As the company announced the layoffs, they also shared a preliminary report on their third-quarter financial results, revealing that they burned through 1.3 billion dollars in cash and lost 9.97 dollars per share.
The ongoing strike has resulted in the shutdown of production for the 737 Max, as well as the 777x and 767s. However, production of the 787s is still happening at a non-union plant in South Carolina. In addressing the difficult situation, Mr. Ortberg acknowledged the need for tough decisions and structural changes in order to remain competitive and deliver for their customers in the long run.
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