Boeing: Doom Loop Or Turning The Tide?

Boeing used to be a fine example of a competitive company on a global level with a range of products spanning from commercial aircraft to weapons and space systems. However, in the last months something seems to have changed with Boeing amid scrutiny by regulatory authorities and other internal clashes that affect its production figures.

With Boeing’s name making the financial headlines often but mostly for the wrong reasons, this article will examine which are the factors that influence the US company’s share price and what the latest developments are.

Boeing Employees Go Against Management

Boeing Co. (BA) management’s latest problem was the strike of employees that started on September 13th as nine out of ten employees in West Coast “rejected a tentative agreement offering a 25% pay rise over four years that had been endorsed by union officials,” as a Reuters report mentioned.

Despite some efforts by Boeing’s administration to find common ground by offering new terms to the 33,000 striking workers, negotiations collapsed once again on October 8th with Boeing Commercial Airplanes President and CEO, Stephanie Pope, suggesting that unions "made non-negotiable demands far in excess of what can be accepted if we are to remain competitive as a business.”

The strike that affected the production lines of Boeing's 737, 777 and 767 jets could play a role in October’s jobs report as several Boeing subcontractors and suppliers have laid off workers to adjust their production levels to the new conditions.

Boeing and the union representing its machinists seemed to have reached a new wage deal, which called for a 35% wage increase, improvements to retirement benefits and a $7,000 signing bonus. The deal was to be ratified by union members this week but the offer was eventually rebuffed. 

Boeing Responds With Layoffs And 777X Delay

In the meantime, Boeing announced on October 12th that it was planning to cut 17,000 jobs or 10% of its global workforce over the next month. Chief executive Kelly Ortberg mentioned that jobs ranging from simple employees to executives and managers are at risk.

The company also noted that the Boeing 777X tests and production would have to be delayed as “the challenges we have faced in development, as well as from the flight test pause and ongoing work stoppage. We have notified customers that we now expect first delivery in 2026.” The Boeing 777X is one of the world’s largest wide-body commercial jetliners while companies such as Emirates, Qatar Airlines, Singapore Airlines and Lufthansa have already placed their orders.

Boeing Crisis Started With The 737 Max Problems

Boeing’s problems started in October 2018 when a Lion Air Boeing 737 Max crashed into the Java Sea followed in 2019 by an Ethiopian Airlines crash involving the same model. Both crashes did not have any survivors. Extensive research conducted by the US Federal Aviation Administration (FAA) showed that the Maneuvering Characteristics Augmentation System (MICAS) software utilised in these commercial jetliners was responsible for the accidents. 

As a result, many operators were forced to ground their 737 Max fleets to be able to make the necessary adjustments to the software. In some cases, fleets were ground from March 2019 to December 2020 and in other even longer than that, creating financial losses to operators.

The issues did not stop there though. In January 2024, an Alaska Airlines 737 Max 9 lost a door plug in flight. The specific model was once again grounded with the FAA specialists finding out that Boeing did not perform the necessary quality control and raising even more questions about its procedures.

Boeing Tries To Turn The Tables 

Since 2018, Boeing has suffered more than $33 billion in core operating losses without calculating and including the enormous hit inflicted on its brand name as one of the top jetliner manufacturers in the world. Economists at Standard & Poor’s said that each month Boeing’s workers remain on strike, it would cost the company $1 billion. 

Gross orders of 315 recorded through the first three quarters of 2024 equals a 63% slowdown in Boeing’s commercial airliner sales on an annualised basis. However, it should be noted that Airbus orders have also fallen by 48% on a yearly basis in the first three quarters of this year.

At the time of writing (21.10), its share price has fallen 38% since the beginning of the year while on a yearly basis, it is down by 14%. Some analysts forecast that this might be its worst yearly performance since the great financial crisis of 2008.

Boeing also announced plans to raise up to $25bn in a debt and stock offering, plus a further $10bn through a credit agreement with banks, in an attempt to give a boost to its finances amid its latest strike and production problems.

Operators Wait For Their Boeing Jets To Be Delivered 

Ryanair’s chief executive, Michael O’Leary, said it was due to receive 20 deliveries before the end of December that were now likely to come in January and February. O’Leary said Ryanair would be doing well next year if it would get 10 or 15 aircraft from Boeing after next March, instead of an expected 30.

Emirates has ordered 262 of the Boeing 777X, making it the biggest customer of the delayed jet. Emirates’ CEO, Tim Clark, expressed his frustration with Boeing’s recent announcement regarding a further delay in deliveries saying: "I fail to see how Boeing can make any meaningful forecasts of delivery dates. Emirates has had to make significant and highly expensive amendments to our fleet programs as a result of Boeing's multiple contractual shortfalls and we will be having a serious conversation with them over the next couple of months.” However, Emirates ordered five more Boeing 777F freighters for its freighter fleet, announcing the deal on October 20th.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.