Boeing withdraws contract offer – worsening the problems

Overnight, Boeing withdrew its 30% pay rise offer. The strike that started on September 13 continues, and bile is rising. Thirty-two thousand people are on strike, causing supply chain mayhem. Boeing is likely to start white-collar furloughs now. Hurricane Milton may be the most significant news issue in the United States. But an industrial hurricane worsening in Puget Sound will impact more than Milton. Milton will only impact Florida, while the Puget Sound storm will affect the entire global commercial aviation industry. Already, the supply chain is in crisis mode. As business grinds down, nobody in commercial aviation benefits. The Boeing strike also impacted Airbus and other OEMs. A weaker supply chain is terrible for everyone. Here are some numbers to illustrate where we are. [caption id="attachment_85946" align="aligncenter" width="580"] AirInsight[/caption] The MAX program accounts for ~80% of Boeing's deliveries. We published our views on Boeing's September orders and deliveries yesterday. Cutting off 80% of deliveries is impactful on a frightening level, especially as Boeing goes into the market seeking $10Bn in fresh capital. The market will likely price any debt at junk levels, making it expensive at the worst time for Boeing. The chart above lays out the wild swings in the MAX program. We have discussed the absence of the MAX 7 and MAX 10 numerous times, and it bears repeating. The MAX program was in crisis before the strike. The latest rudder problem is yet another in a series of program issues. Is the MAX cursed? On the 283rd day of 2024, Boeing delivered an average of 0.8 MAXs per day this year. Last year, it was 1.08, the best year to date. In 2019 (its best year to date), Boeing produced 1.2 MAXs per day; this year, its average is 0.5. How can anyone sugarcoat these numbers? Does the Union have a case for better benefits? Yes. Can Boeing afford it? No. Of course, there is a place between these two parties. But who has the vision to close the gap? Kelly Ortberg should be putting his foot down, cutting the Gordian Knot. There appear to be too many management layers between him and Boeing's negotiators. He should cut them out and move to the table himself. Lead from the front. It's clear that without ending the strike, Boeing will hurt in many ways it can't afford to. In a not-dissimilar strike threat by the US International Longshoremen’s Association, it became clear in three days that ending the strike was necessary. The workers got what they wanted, but we are confident that ports will automate now faster than ever. That is the way of free enterprise. Everything is priced to the point of efficiency. While the skill set required to assemble aircraft makes it hard for Boeing workers to be replaced, one should ask why Boeing always has labor strife. Airbus has peaceful labor. Embraer has no strikes. Why always Boeing? Perhaps the problem is inside the company's management. There appears to be something deeply toxic in the company, and the sooner Kelly Ortberg roots this out, the better. Time is not on his side.

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