Boeing has indicated it is ready to return to the negotiating table.
A strike by some 33,000 Boeing machinists has halted production of the U.S. aerospace giant’s best-selling planes. The workers began protesting Friday at Boeing plants and factories in Washington, Oregon and California after rejecting a contract offer negotiated and approved by their union.
The work stoppage will not immediately affect commercial flights, but it could still result in significant losses for the company, which is headquartered in Arlington, Virginia, but has roots in the Seattle area, where it makes most of its airliners. Boeing already has a battered reputation and financial problems that have piled up in recent years.
Below you can read what you need to know about the possible consequences of the strike and what could happen next.
The strike will not affect travelers unless it lasts a very long time.
The strike is halting production of the 737 Max, Boeing’s best-selling passenger plane, along with the 777, or triple-seven jet, and the 767 freighter at plants in Renton and Everett, Washington, near Seattle. It is unlikely to affect Boeing’s 787 Dreamliners, which are built by non-union workers in South Carolina.
Airlines sometimes place orders for large numbers of planes, but when they do, deliveries are usually spread out over several years. The strike is therefore unlikely to result in a shortage of planes for any particular airline. Some airlines may have to keep some of their older planes flying longer because the Boeing jets they bought to replace them are delayed.
Boeing, however, stands to lose a lot of money, at least in the short term. Based on the length of previous strikes at Boeing, the last two in 1995 and 2008, TD Cowen aerospace analyst Cai von Rumohr says it’s realistic to think the current strike could last until mid-November, when workers’ $150 weekly payments from the union’s strike fund might seem small in the run-up to the holidays.
A strike that long would cost Boeing up to $3.5 billion in cash flow, since the company gets about 60 percent of the sales price when it delivers a plane to a buyer, von Rumohr added. The eight-week strike in 2008 cost the company about $100 million a day in deferred revenue.
What impact do the striking workers have? They are skilled workers that Boeing cannot simply replace.
Boeing has to keep making these (planes) because Boeing is losing money because of their safety problems, said Art Wheaton, director of labor studies at Cornell University’s School of Industrial and Labor Relations. And safety problems are often caused by understaffing.
Wheaton said striking members of the International Association of Machinists and Aerospace Workers had legitimate concerns about the rejected contract, which would have raised wages by 25 percent over four years, well below the union’s original demand of 40 percent over three years.
“They haven’t had a raise in 10 years, they’re trying to make up for lost time,” Wheaton said, pointing to the broader backdrop of inflation and rising costs of living.
“There was a lot of bad blood created by other concessions workers had to make in their last agreement,” he added.
The union initially wanted to restore traditional pensions that were abolished a decade ago. The demand was a major stumbling block in early contract negotiations, but the union instead agreed to an increase in contributions to employees’ 401(k) retirement accounts and a promise that Boeing would build its next new plane in Washington.
“This is about respect, this is about the past, and this is about fighting for our future,” IAM District 751 President Jon Holden said in announcing Thursday night’s vote. The national union issued a statement of support, saying negotiating teams would regroup soon and begin planning next steps to reach an agreement that meets members’ needs.
Boeing has indicated it is ready to return to the negotiating table.
“The message was clear: the preliminary agreement we reached with the IAM board was not acceptable to our members,” the company said in a statement, adding that it is committed to repairing the relationship with our employees and the union.
Chief Financial Officer Brian West said Friday that CEO Kelly Ortberg, who only became Boeing CEO on Aug. 8, was already working on ways to address union members’ concerns.
Experts say it depends on how much Boeing is willing to open its wallet. Bank of America analyst Ronald Epstein said Friday that Boeing will have to come closer to the union’s original proposal of a 40 percent wage increase and possibly make other concessions.
Boeing has more at stake than just its finances. Wheaton said Boeing doesn’t want another dent in its reputation.
Little has gone right for Boeing this year. A panel exploded and a gaping hole appeared in one of its passenger jets during an Alaska Airlines flight in January. NASA also left two astronauts in space instead of sending them home in a troubled Boeing spacecraft.
The strike could also cause the company, which has lost more than $25 billion in the past six years, to fall further behind European rival Airbus in orders and deliveries of new jetliners.
“They don’t really need this war if they can avoid it,” Wheaton said.
(Only the headline and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First publication: Sep 14, 2024 | 07:17 AM IST