News / Boeing’s turnaround plan hits a hurdle as machinists vote to continue strike

© Valerio Rosati

Boeing’s travails continue as its machinists voted to continue a strike that has hobbled aircraft production and aggravated the company’s financial woes since 13 September.

The strikers have rejected a 35% wage hike offer by management a few days ago.

Nearly two-thirds (64%) of the 33,000 members of the International Association of Machinists and Aerospace Workers, districts 751 and W24, who voted rejected the proposal. While some called it a step in the right direction, many see restitution of retirement benefits, wrested from them years ago, as a key plank in any settlement.

The continuation of the strike hobbles management’s ability to proceed with its turnaround plan, idles production of the 737, 767 and 777 models and aggravates Boeing’s financial situation, costing the company about $1bn a month.

Boeing CFO Brian West told analysts yesterday he expected the company to continue to ‘burn cash’ in the fourth quarter and throughout 2025. Including Q3 this year, for which it tabled results yesterday, Boeing has reported losses of more than $30bn since 2019.

As the voting on the contract proposal was taking place, management reported a $6.1bn loss for the third quarter and negative cash flow of $1.3bn, but it outlined its vision for change, to turn the company around.

In the earnings call, which he shared with all Boeing employees ahead of the session in hopes of gaining their support, Kelly Ortberg, who took over as CEO of the troubled aerospace company in August, said the company was at a crossroads – faced with an erosion of trust in the firm, excessive debt and “serious lapses in our performance across the company”; but sustained by a backlog of roughly half a trillion dollars and by a customer base and employees that want the company to succeed.

He outlined four essential tasks to move forward.

“We will be focused on fundamentally changing the culture, stabilising the business and improving programme execution, while setting the foundation for the future of Boeing.”

Mr Ortberg promised the change in culture would be from the top down, driven by values that “will be used to hold leaders accountable in how they lead our teams in delivering safe, high-quality products and services to our customers”.

The first indication of a new plan, however, had come on 11 October with the announcement that the company would lay off about 17,000 employees, a 10% reduction in the workforce.

Meanwhile, Mr Ortberg pointed out that planned corrections would take time to play out.

“Boeing is an airplane company and at the right time in the future we need to develop a new airplane. But we have a lot of work to do before then. This includes stabilising our business, improving execution on the development programmes, streamlining the portfolio to do what we do well and restoring the balance sheet so that we do have a path to the next commercial aircraft. We need to reset priorities and create a leaner, more focused organisation.”

Investors had been hoping for some indication as to which activities were to be curtailed or dropped altogether, and which aspects of the business Boeing would focus on more, but Mr Ortberg did not disclose any details.

And he told CNBC: “We’re going through a process right now to look at the overall portfolio and seeing what we want to look like five years from now. That may include streamlining certain things,” adding that no decision had been made yet.

An immediate priority is to bring about an end of the work stoppage and resume delivering 737, 767 and 777 aircraft. Also on 11 October, the company signalled that it expected to deliver the first 777X in 2026, having recently commenced certification test flights for the type.

The 777X, which has garnered 481 orders to date, now stands to enter the market six years behind schedule. And carriers are unhappy.

Cathay Pacific told Bloomberg this week it was disappointed with the delays – it had been expecting the first of its 21-strong order for 777-9s to arrive next year, not 2026.

“We want all our aircraft, and we’d like them to be delivered at the time that they’re promised,” said the carrier’s chief operations and service delivery officer, Alex McGowan. “When they’re not, that’s a disappointment to us.”

Boeing also told customers earlier this month not to expect any 777-8 freighters before 2028, and that it would stop 767 freighter production once it had completed deliveries of the type to FedEx and UPS in 2027.

In September, Boeing clocked up 65 aircraft orders, including 11 for 777Fs. On Monday, Emirates announced an order for five 777Fs, alongside plans to operate 21 freighters by 2026. That may be ambitious, given Boeing’s problems and the backlog of 777s.

By last month, orders for 777s stood at 2,295, of which 1,738 had been delivered. Airlines with orders for 777Xs have retained older models to bridge the gap, which has crimped feedstock for freighter conversions and kept residual values of those planes high.

Arguably, the clamour for passenger 777s could persuade Boeing to put freighter production in a lower gear to boost output of passenger models.

Meanwhile, output of 787s is currently at four units a month, which management hopes to raise to five by the end of the year.