The strike wave is intensifying, and the financial crisis is worsening! Boeing announced a 10% layoff.
On October 11th local time, Kelly Ortberg, President and CEO of global aircraft manufacturer Boeing (BA), announced in a memo to employees that they plan to lay off approximately 10% of their workforce in the coming months, including executives, managers, and employees.
According to the official website, as of the end of 2023, Boeing has over 170000 global employees, which means this round of layoffs will be around 17000.
Boeing's business is also facing adjustments. Ottoberg announced that the first delivery of Boeing's new wide body aircraft 777X will be postponed until 2026. "We have encountered challenges in the development process, and the suspension and continued shutdown of flight tests will delay the project schedule for the 777X." According to the official website, the new Boeing 777X will become the world's largest and most efficient twin engine jet aircraft. It is reported that the 777X was originally scheduled to enter commercial operation in 2020, which means it has been delayed by 6 years compared to the original plan. Otburger also announced that production of the 767 freighter will cease in 2027 after completing the remaining orders, and production of the KC-46A aerial refueling aircraft will continue.
In terms of BDS (Space and Security) business, Oterberg stated that its performance in fixed price development projects has not reached the expected level, and it is expected to incur significant losses this quarter. Mainly due to the suspension of commercial derivatives, ongoing project challenges, and the company's completion of 767 freighter production. Otterberg also stated that he will provide additional supervision for the business and these projects.
The memo also pointed out that Boeing's current business situation is difficult and the challenges it faces are understandable. In addition to addressing the current environment, structural changes must be made to concentrate resources on areas that are crucial to it.
The ongoing strike wave at Boeing has intensified, which has also had a certain impact on its performance. According to foreign media reports, Ultraberg stated in a letter to employees that significant layoffs are necessary due to the ongoing strike of 33000 West Coast workers, which has led to the suspension of production of 737 MAX, 767, and 777 aircraft.
On October 11th, Boeing also announced its preliminary results for the third quarter. The company expects third quarter revenue to be $17.8 billion, lower than market expectations, with a loss of $9.97 per share and an operating cash outflow of $1.3 billion. As of the end of the third quarter, the total amount of cash and securities investments was $10.5 billion. From a business perspective, the commercial aircraft company is expected to generate revenue of $7.4 billion in the third quarter, with an operating profit margin of -54%. The defense, space, and security departments are expected to generate revenue of $5.5 billion with an operating profit margin of -43.1%.
The announcement stated that the third quarter performance was mainly affected by the shutdown of the American International Association of Machinists and Aerospace Workers (IAM) and earnings in the commercial aircraft and defense sectors.
Boeing's performance has faced challenges in the first half of this year. In the first half of the year, the revenue reached 33.435 billion US dollars, a year-on-year decrease of 11%; GAAP net loss was $1.794 billion, with the loss expanding more than two-fold year-on-year. Boeing stated that the losses in the first half of 2024 were mainly due to a decrease in commercial aircraft deliveries and losses in defense development projects. In terms of main business, Boeing's commercial aircraft business revenue in the first half of the year was $10.656 billion, a year-on-year decrease of 31%; The operating loss was 1.858 billion US dollars, compared to 998 million US dollars in the same period last year.
For the preliminary performance of the third quarter, Otterberg said, "Although the business is facing short-term challenges, we are making important strategic decisions for the future and have identified the actions we must take to revitalize the company. We will focus on areas that are crucial to our future and ensure that we have the balance sheet necessary to invest, support employees, and provide services to customers
According to preliminary performance, the commercial aircraft division is expected to confirm pre tax earnings of $3 billion on the 777X and 767 projects in the third quarter. It is currently expected that the 777-9 will be delivered for the first time in 2026, and the 777-8 freighter will be delivered in 2028, resulting in a pre tax revenue expense of $2.6 billion. The department also plans to complete the production of the 767 freighter and confirm a pre tax expense of $400 million on the project, which also reflects the impact of IAM's shutdown. Starting from 2027, Boeing will specialize in producing 767-2C aircraft to support the KC-46A tanker program. In addition, the defense, space, and security departments are expected to confirm pre tax earnings of $2 billion.
It is worth noting that this round of layoffs and business adjustments is the most significant move by Boeing since Ultraberg took office more than two months ago.
Starting from August 8th this year, Ottoberg became the new President and CEO of Boeing. Otterberg is a senior aviation industry insider, 64 years old, with over 35 years of aerospace leadership experience. Prior to this, he led Rockwell Collins for five years, integrating the company with United Technologies and RTX until retiring from RTX in 2021.
Previously, the industry had pointed out that Ottoberg would face a series of challenges in leading Boeing to turn losses into profits, including sustained losses, additional scrutiny from regulatory agencies, supply chain pressures, trust crises among aviation customers caused by aircraft delays, cost overruns in the defense sector, and tense labor negotiations. There is currently a threat of strikes. The market and the aviation industry are also looking forward to whether Ultraberg's appointment can solve the many challenges faced by Boeing and restore stability after experiencing multiple safety and quality crises.
As of the close of the US stock market on October 11th, Boeing closed at $151.02 per share, up 3%, and fell 0.85% after hours.