Such a strike would elevate Boeing’s current difficulties, as the company is heading toward its sixth consecutive year of financial losses and has recently appointed a new CEO to address its challenges.
The International Association of Machinists and Aerospace Workers (IAM) regional branch reports significant disagreements on wages, health care, and job security. IAM District 751 predident Jon Holden indicated that the union initially sought pay raises exceeding 40% over three years but acknowledged that “that’s probably not where we’re going to end up.”
The union has planned a two-part election for Thursday, where workers will vote on Boeing’s final contract offer and decide whether to authorize a strike if the offer is rejected.
Voting will take place at multiple locations in Washington state and Southern California, with a walkout potentially starting by Friday morning. A July straw vote indicated overwhelming support for a strike, with 99.99% in favor.
Holden commented, “What we are asking for is reasonable. We need to get more wages to address the very low increases over the last 10 years, massive inflation, massive cost-shift on health care. We are trying to reach an agreement, but (union members) are ready to take action if we don’t get there.”
He added that the union’s strike fund is substantial and ready to be utilized if necessary.
Boeing’s response and new CEO Kelly Ortberg’s role
Boeing declined to make an executive available for comment but provided a brief statement. “We’re confident we can reach a deal that balances the needs of our employees and the business realities we face as a company,” the spokesperson said.
New CEO Kelly Ortberg has adopted a conciliatory approach toward labor relations. He is based in Seattle, close to Boeing’s main production facilities, and visited the 737 Max plant on his first day. TD Cowen aerospace analyst Cai von Rumohr noted, “He understands that they are basically contentious relationships with the union, and he wants to make those relationships better.”
Ortberg faces a significant challenge as he works to address Boeing’s numerous issues, including improving manufacturing processes, securing regulatory approval for the 777X jumbo jet, managing over-budget government contracts, reducing $45 billion in net debt, and integrating Spirit AeroSystems, a recent acquisition.
Restoring Boeing’s reputation for quality is also a critical task following two fatal crashes involving the 737 Max and other quality issues. Although a strike would not immediately affect consumers or flight operations, it would halt production and delay deliveries, significantly impacting Boeing’s cash flow.
Financial implications of a Strike
Von Rumohr explained, “During a strike, they don’t work on planes, they don’t deliver planes. Aircraft makers typically get about 60% of the purchase price on delivery, so not delivering planes has a massive impact on your cash in-flow, and your costs probably continue on.”
A similar strike in 2008 cost Boeing approximately $100 million a day in deferred revenue. Meeting the union’s wage demands could require Boeing to spend $1.5 billion, a cost that Jefferies aerospace analyst Sheila Kahyaoglu deemed manageable compared to the potential $3 billion impact of a strike.
Boeing’s financial situation is more precarious than in 2008, having lost $27 billion since 2019 amid the 737 Max grounding and other issues. The company remains a leading aircraft manufacturer, with a significant backlog of orders valued at over $500 billion. However, its defense and space divisions are also struggling, including a recent setback with NASA’s decision to use SpaceX instead of Boeing’s Starliner capsule for astronaut transport.
Union’s demands
Job security is a key concern in the negotiations, particularly following the loss of work on the 787 Dreamliner, now assembled by nonunion workers in South Carolina. The IAM seeks assurance of job retention and representation for future projects, which are vital as one-third of the union’s members work on the 737 Max.
Holden believes the union is well-positioned to secure a favorable contract, citing the high demand for skilled labor and Boeing’s substantial backlog. “This company has a massive backlog of over 5,000 airplanes to build and deliver, so we are in high demand right now. That’s our leverage,” he said.