Boeing is bracing for substantial restructuring as it prepares to lay off approximately 17,000 workers, or 10% of its global workforce, amid a slew of financial and operational challenges. The aerospace giant’s workforce reduction plan comes as a direct response to escalating losses and an ongoing labor strike involving 33,000 machinists that has effectively stalled production of Boeing’s best-selling commercial jets. The prolonged strike, initiated by the International Association of Machinists and Aerospace Workers on September 14, was prompted by contract disputes and has since paralyzed output for Boeing’s 737 Max and 777 models, leading to extensive revenue loss.
CEO Kelly Ortberg, who assumed leadership in August as the company’s third CEO in five years, conveyed the gravity of Boeing’s situation to employees in a memo, citing “near-term challenges” and the need for “tough decisions” to ensure the company’s long-term viability. Ortberg emphasized that layoffs would span all levels, affecting executives, managers, and rank-and-file employees, marking one of the largest job reductions in Boeing’s recent history.
These layoffs come on the heels of heightened scrutiny from the Federal Aviation Administration (FAA) after a 737 Max panel malfunctioned on an Alaska Airlines flight earlier this year, renewing concerns about safety standards. Furthermore, Boeing recently agreed to a $243.6 million fine to avoid a criminal trial over fraud allegations related to the 737 Max, adding to the company’s legal and financial strains.
Financially, Boeing has posted severe losses, with third-quarter projections indicating a cash burn of $1.3 billion and a staggering loss of $9.97 per share. The company also announced significant write-downs, including $2.6 billion related to delays on the 777X, $400 million on the 767, and $2 billion on various defense and space programs, impacting projects such as the new Air Force One jets and a NASA space capsule.
Production on key projects has been halted at several Boeing facilities, with only the 787 model continuing to roll out from the company’s nonunion plant in South Carolina. Ortberg stated that Boeing’s situation “requires structural changes” as well as “additional oversight” for its troubled defense and space sectors, both of which have struggled with cost overruns and delays.
Boeing’s recent woes extend to an array of international issues and strained customer relations. The company faces additional scrutiny over safety after Ethiopian Airlines requested emergency procedures for the 737 Max just before a 2019 crash that killed 346 people. Families of crash victims are calling for harsher penalties and transparency, seeking a criminal trial to investigate Boeing executives’ awareness of flight control issues.
The layoffs and operational challenges underline Boeing’s precarious position in the aerospace industry. In the coming weeks, the company faces pivotal negotiations with labor unions and must navigate the impending release of its third-quarter financials on October 23.
