News / Freighter delivery delays, as strike goes on, add to Boeing woes

10/10/2024

Hopes that Boeing can step up deliveries of cargo aircraft took a hit yesterday when it withdrew its latest offer to some 33,000 striking machinists, extending the shutdown of aircraft production indefinitely.

The labour conflict is taking a heavy toll on Boeing and reducing its credit rating, allegedly causing management to consider a sale of stock and equity to raise money.

After two days of mediated negotiations this week failed, Boeing halted talks with the union and withdrew its recent pay offer of a pay rise. With no new talks scheduled, the strike is approaching its fourth week.

Having tabled what it called its “best and final” offer of a 30% wage hike, plus performance benefits, last month, management found the union’s position non-negotiable and declared there was no point in further negotiations.

The machinists are demanding a 40% rise over four years and the restoration of a defined benefits pension plan that was wrested from them in contract negotiations a decade ago. According to union leadership, a survey of its members showed that management’s latest offer was not enough.

The stoppage is crippling Boeing aircraft output. Beyond the 737 MAX, it has also halted production of 767 and 777s, again disrupting deliveries of 777 freighters. The manufacturer has struggled to ramp up production of widebody aircraft, including plans to turn out five 787s a month, decimated by implementation of the FAA-mandated safety and quality plan.

Management has signalled reduced plane deliveries as a result of the strike, which has already taken a toll: last month, the company rolled out 33 aircraft, after 40 in August. It logged 65 orders in September, including 11 for 777 freighters.

Throughout the first nine months of the year, Boeing delivered 291 aircraft, the majority (225) being 737 MAXs.

The company’s new leadership – its third in five years – is still labouring under the shadow of the quality issues that triggered the intervention by the authorities. On Tuesday, the FAA issued a safety alert about the potential of limited, or jammed, rudder movement on certain 737s.

The aviation authority had taken flak from the National Transportation Safety Board over the issue. The TSB warned that more than 40 foreign operators of 737s might be using aircraft with rudder components that could pose safety risks, and in a rare public move, lambasted the FAA for failing to take action.

And these problems are only a fraction of the headaches for Boeing’s leadership. the firm has also struggled with problems with its Starliner programme, picked by NASA as one of two choices for the transport of astronauts to and from the international space station.

On the military side, there have been ongoing problems with the KC-46 Pegasus tanker and the T-7A jet trainer.

On top of these issues, the strike and its fallout on aircraft deliveries (which trigger payment) are hitting Boeing’s balance sheet. The strike produced an estimated $3.5bn hit last month.

And, in response to the strike, S&P Global Ratings placed the manufacturer’s credit rating on ‘negative watch’, flagging potential cash outflows of $10bn this year due to strike-related costs and the overhaul of manufacturing processes.

One positive development in this mess has been a green light for test flights of the 777X for certification, way behind schedule thanks to the fallout from the MAX. Boeing has not delivered a 777 passenger plane in almost three years, having ended production in anticipation of transitioning to the 777X.

For companies looking to get hold of a 777F, this might be cold comfort. Given the long hiatus in passenger 777 deliveries, Boeing might be tempted to throttle-back 777 freighter production to catch up on passenger output.

Meanwhile, Airbus is not able to shoulder much demand from customers impatient with its North American rival. The European plane -maker delivered 50 aircraft in September, a drop of 9% on August, which brought its tally for the first nine months to 497 deliveries.

Airbus has cut its target of turning out 800 aircraft this year to 770, but that may still prove ambitious. According to one observer, this would require an 11% year-on-year increase in output in Q4, to 273 units.