Boeing HQ
Boeing faces another crisis as new documents revealed that the company failed to respond to requests on safety issues from Ethiopian Airlines prior to their fatal crash. Some industry experts speculate that such information may have enabled the pilots to avoid the crash. Family victims now have additional evidence as they ask that the deferred prosecution agreement, which they viewed as a sweetheart deal for Boeing, be reopened. This additional evidence could provide the impetus to re-open that case, and punish Boeing for its purposeful obfuscation during the 737 MAX certification process with the FAA.
Meanwhile, the IAM strike talks broke off with little or no progress, and conflicting statements from the company and the union. The company has now withdrawn its “best and final” offer. This comes amidst the “leak” of a memo from division CEO Stephanie Pope in which she stated that the union demands “non-negotiable demands far in excess of what can be accepted.” The union indicated that Boeing “refused to propose any wage increases, vacation/sick pay accrual, progression, ratification bonus, or the 401K match.SCRC contribution. Â
Given the width of the gulf between the parties, there may be only one more negotiation session prior to Boeing reporting its 3rd quarter earnings on the 23rd of the month. We are not optimistic that a deal will be reached before that earnings call, and anticipate a long walkout. Â
Of course, a long walkout will place increased pressure on Boeing financially, with estimates of a cash burn of $1 billion per month. That is unsustainable for Boeing beyond a couple of months, and the union is well aware that it is in the driver’s seat for negotiations. Observers are calling Boeing a “corporate Titanic” and are now discussing the additional interest cost if Boeing securities are downgraded to junk status.
With Boeing examining its options for new equity or hybrid instruments, analysts are preparing to factor in higher interest costs into their forecasts for the company given the increasing likelihood of a downgrade each day that the strike continues.
In good news for Boeing, the company received orders for 11 777F freighters. The backlog for the successful 777-F freighter now stands at 71 aircraft. The freighter model is keeping the 777 program running prior to the off-delayed certification of the 777-X, now expected for late 2025 or early 2026, with different timing estimates among industry analysts.
Finally, IATA is worried that late deliveries are impacting airline staffing. Apparently several airlines have furloughed pilots that were trained and prepared to fly aircraft that are not forthcoming from Boeing and Airbus. While the Boeing problems are more severe, both of the major OEMs have had supply chain constraints prevent them from reaching their planned ramp-up goals. With narrow-body aircraft sold out for more than 7 years, making up for lost deliveries simply isn’t going to happen without further delaying the entire skyline. The OEMs and airlines are each in difficult positions.
Links to key news items follow:
- Boeing didn’t give airline safety data before 737 MAX crash – Daily Beast
- Families of Boeing crash victims demand justice as new documents reveal concealed 737 safety issues – Aviation 24
- Boeing scrambles for cash and halts strike talks – Inc Magazine
- The Boeing strike has no end in sight – Quartz
- Boeing’s bold gamble: A corporate Titanic sailing toward junk status – Financial Express
- Boeing faces $100 million more in interest costs if rating is cut to junk – Yahoo
- Boeing posts another record month with 11 777F orders – Cargo Facts
- Aircraft delays force airlines to furlough crew, IATA head says – BNN Bloomberg
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