Boeing to cut 17,000 jobs and delay delivery of first 777X as strike weighs on finances

Boeing to cut 17,000 jobs and delay delivery of first 777X as strike weighs on finances

By Allison Lampert, David Shepardson

(Reuters) – Boeing will cut 17,000 jobs, delay first deliveries of its 777X jet by a year and record $5 billion in losses in the third quarter, as the U.S. planemaker continues to slump over the a month-long strike.

Boeing CEO Kelly Ortberg said in a message to employees that the company must reduce its workforce “to align with our financial reality” after an ongoing strike by 33,000 U.S. West Coast workers discontinued production of its 737 MAX, 767 and 777.

“We have reset our staffing levels to align with our financial reality and a more focused set of priorities. Over the coming months, we plan to reduce the size of our total staffing by approximately 10 percent. These reductions will concern executives, managers and employees,” Ortberg’s message said.

Boeing shares fell 1.7% in after-hours trading.

Boeing recorded charges totaling $5 billion for its defense and commercial businesses.

Reaching an agreement to end the work stoppage is critical for Boeing, which filed an unfair labor practice lawsuit Wednesday, accusing the machinists’ union of failing to negotiate in good faith. Ratings agency S&P estimates the strike is costing it $1 billion a month and risks losing its valuable investment-grade credit rating.

Ortberg also said Boeing has informed customers that the company now expects the first delivery of its 777X in 2026 due to the challenges Boeing faced during development, as well as the flight test pause and shutdown. work in progress. Boeing previously faced 777X certification issues that significantly delayed the plane’s launch.

Boeing, which reported third-quarter results on Oct. 23, said in a separate statement that it now expects revenue of $17.8 billion, a per-share loss of $9.97 and negative operating cash flow of $1.3 billion.

“As our business faces near-term challenges, we are making important strategic decisions for our future and have a clear vision of the work we must do to restore our business,” Ortberg added in a statement.

Boeing will end its 767 cargo plane program in 2027 when it completes and delivers the remaining 29 planes on order, but said production of the KC-46A tanker will continue.

The company announced that in light of the job cuts, it would end the furlough program for employees announced in September.

Even before the strike began on September 13, the company had exhausted its cash flow as it struggled to recover from the explosion of in-flight panels on a new plane in January, which exposed weak safety protocols. safety and prompted American regulators to curb its production.

Reuters reported this week that Boeing was exploring options to raise billions of dollars through stock sales.

These options include selling common stock as well as securities such as mandatory convertible bonds and preferred stock, according to sources. One of the sources said they suggested Boeing raise about $10 billion.

The company has approximately $60 billion in debt and recorded operating cash flow losses of more than $7 billion for the first half of 2024.

Analysts estimate that Boeing would need to raise between $10 billion and $15 billion to maintain its ratings, which are now a notch above junk.

(Reporting by Allison Lampert and David Shepardson; editing by Rod Nickel)