According to CCTV News, on October 11th local time, Boeing announced plans to cut 17000 jobs worldwide, with the layoff scale reaching 10% of current employees.
Boeing stated that the strike of its mechanics has exacerbated the company's difficulties and will result in greater losses to its business.
Boeing also stated that it will postpone the production of the new model 777X until 2026, instead of the originally scheduled 2025. Meanwhile, Boeing will cease production of 767 cargo aircraft in 2027 after completing existing orders.
Boeing is facing a credibility crisis
On October 8th local time, the Federal Aviation Administration (FAA) of the United States stated that it has issued a safety alert to airlines, warning that the rudder movement of some Boeing 737 models may be restricted or stuck.
Previously, the National Transportation Safety Board of the United States stated on September 30th that over 40 foreign operators of Boeing 737 aircraft may be using aircraft with rudder control system components that pose potential safety risks.
The Federal Aviation Administration of the United States stated that the alert issued on October 8th provided information about the automatic inspection of the existing rudder system, which will identify situations where rudder movement is restricted or stuck before landing.
In addition, after the Boeing passenger plane door jam and air detachment accident in early January this year, the Federal Aviation Administration of the United States conducted a six week production audit investigation on Boeing. The survey results were first released in detail on September 25th.
According to reports, the Federal Aviation Administration of the United States has provided a 116 page report to the Senate Permanent Subcommittee on Investigations, which lists 97 non compliances by Boeing in manufacturing process control, parts handling and storage, quality control, and other areas. The report states that it has found 23 instances that confirm workers did not follow production processes or were not skilled enough.
The committee stated that an internal investigation by Boeing in May showed that many mechanics felt severe pressure during aircraft production and had to prioritize speed over quality.
Since the beginning of this year, Boeing has continuously exposed quality and safety control issues, involving 737 MAX, 787 and other aircraft models, as well as Boeing's key component suppliers, which are bound to be Sharp Aviation Systems. A series of quality and safety issues have plunged Boeing into a credibility crisis, resulting in significant losses and forcing high-level personnel adjustments. In addition, the Boeing "StarCraft" spacecraft experienced propulsion failures and helium leaks during its first manned test flight in June. After several delays, the spacecraft returned to Earth empty on the 7th of this month.
33000 workers on strike
On September 13th local time, approximately 33000 Boeing workers in the Seattle and Portland areas of the United States went on strike. The day before, they rejected the temporary agreement proposed by Boeing and the International Association of Machinists and Aerospace Workers (IAM) on September 8th with 94.6% of the votes against it, with 96% of workers supporting the strike, far exceeding the two-thirds of votes required for a strike.
The temporary agreement proposes a 25% salary increase for employees during the four-year contract period, as well as other improvements to healthcare costs and retirement benefits. Stephanie Pope, CEO of Boeing's Commercial Airplanes division, described the agreement as providing the largest salary increase and more affordable healthcare coverage in Boeing's history. However, the union did not buy it. The wage increase demanded by workers during negotiations was 40%, while Boeing's offer of a 25% increase was far lower than this. Many employees complained that "this wage level cannot keep up with the constantly rising cost of living and expensive prices in Seattle".
Civil aviation expert Li Hanming analyzed to 21st Century Business Herald reporters that strikes by American industrial workers are not new and have become a means of collective wage bargaining. The direct cause of the Boeing strike is that the labor and management sides cannot reach an agreement on the salary increase: the labor side expects a 40% salary increase within four years (equivalent to an annual increase of 9% or an additional month's salary per year); The management is only willing to increase the salary by 25% (equivalent to an annual increase of 6%).
Both sides are arguing so convincingly about the salary increase, which is also related to Boeing's sluggish revenue in recent years. Since 2019, Boeing has been experiencing net losses for four consecutive years, with losses doubling year-on-year in the first half of this year, resulting in a net loss of nearly $1.8 billion within six months. Since 2019, the total loss of Boeing's core business has exceeded 33 billion US dollars.
Li Hanming said that during the epidemic, the demand for long-distance travel has greatly decreased, and airlines have generally "slimmed down" by postponing and canceling new aircraft orders, inevitably affecting Boeing's cash flow. In addition, the safety issues of the 737 MAX series have plagued Boeing, causing many orders to be lost, and Boeing's finances have become increasingly strained.
Facing credit risk of being rated as' junk '
According to Caixin, Boeing is at risk of being downgraded to junk status by S&P, as the company continues to be affected by ongoing strikes and S&P has put the aircraft manufacturer on a credit watch list for possible downgrade. On October 8th, S&P stated in a statement that the fourth week of the Boeing mechanics union strike has increased the company's financial risk, estimating that Boeing will face approximately $10 billion in cash outflows this year.
Another rating agency, Moody's, stated in September that it is evaluating the "duration of the strike and its impact on cash flow, as well as the potential equity financing that Boeing may undertake to enhance liquidity," and may downgrade its rating. In April, Moody's downgraded Boeing's credit rating to Baa3, just one step away from being rated as "junk".
If the credit rating drops to junk level, not only will the cost of issuing bonds increase significantly, but the difficulty of financing will also increase, because funds such as pensions can only be used to invest in "investment grade" companies, and the financing pool of "speculative grade" or "junk grade" will correspondingly shrink.
Integrated from CCTV News, 21st Century Business Herald (Reporter: Lai Zhentao), Caixin News Agency