Boeing to cut 17,000 jobs and delay first 777X deliveries as strike wreaks havoc

By Alison Lampert and David Shepardson

(Reuters) – Boeing will cut 17,000 jobs — 10% of its global workforce — delay the first delivery of its 777X jet by a year and record a $5 billion loss in the third quarter, as the U.S. planemaker continues to spiral into a months-long strike.

CEO Kelly Ortberg said in a message to employees that the significant reductions were necessary “to adjust to our financial realities” after an ongoing strike by 33,000 US West Coast workers halted production of its 737 MAX, 767 and 777 jets.

“We have reset our workforce levels to align with our financial realities and to have a more focused set of priorities. In the coming months, we plan to reduce the size of our total workforce by approximately 10 percent. These reductions include executives, managers and employees,” Ortberg's message said. .

Boeing shares fell 1.1% in after-market trading.

The sweeping changes are a major move for Ortberg, who took over the embattled planemaker in August by pledging to reset relations with the union and its workers.

Boeing recorded a total of $5 billion in pre-tax earnings charges for its defense business and two commercial aircraft programs. On September 20, Boeing fired Ted Colbert as head of its troubled aerospace and defense unit.

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

Analysts on average expected Boeing to generate a negative cash burn of $3.8 billion in the quarter, according to LSEG data.

Thomas Hayes, an equity manager at Great Hill Capital, said by email that the layoffs could put pressure on workers to end the strike.

“Striking workers who are temporarily without a paycheck don't want to be unemployed workers who are permanently without a paycheck,” Hayes said. “I would guess that these workers don't want to find themselves because the strike will be resolved in a week. 17,000 in the next batch of cuts.”

Reaching a deal to end the work stoppage is critical for Boeing, which filed an unfair-labor-practice charge Wednesday alleging the machinists union failed to bargain in good faith. Ratings agency S&P estimates the strike is costing Boeing $1 billion a month and the company is at risk of losing its prized investment-grade credit rating.

Ortberg also said that Boeing has informed customers that it now expects the first delivery of its 777X in 2026 due to development challenges, flight-test breaks and work stoppages. Boeing had already faced certification issues for the 777X that significantly delayed the plane's launch.

“While 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 company,” Ortberg added.

Boeing will end its 767 freighter program in 2027 when it completes and delivers the remaining 29 planes it ordered, but production will continue for the KC-46A tanker.

The company said in light of the job cuts it will end a furlough program for salaried workers announced in September.

Even before the strike began on Sept. 13, the company was burning through cash as it struggled to recover from a mid-January air panel blowout on a new plane that exposed poor safety protocols and prompted US regulators to halt its production.

Boeing faces a court hearing in Texas on Friday before a judge who will decide whether to accept the planemaker's offer to plead guilty to fraud under an agreement with the Texas Department of Justice.

Boeing agreed to pay up to $487.2 million in fines, spend at least $455 million on safety improvements and face three years of court-supervised testing and independent oversight.

Also Friday, a federal watchdog said the Federal Aviation Administration is “not effective” in overseeing Boeing production.

Reuters reported this week that Boeing is examining options to raise billions of dollars by selling stock and equity-type securities.

Those options include the sale of common stock as well as securities such as mandatory convertible bonds and preferred equity, according to sources. A source said they advised Boeing that it would raise about $10 billion.

The company has about $60 billion in debt and has posted an operating cash flow loss of more than $7 billion in the first half of 2024.

Analysts estimate Boeing will need to raise $10 billion to $15 billion to maintain its rating, which is now one notch above junk.

“For those of us who have watched Boeing closely, the company's announcement of delayed deliveries and labor cuts at all management and employment levels is not much of a surprise as their cash and credit reserves dwindle,” said Michael Ashley Shulman, partner at Running Point. Capital Advisors. “Their credit ratings and share prices have been at risk for the better part of a decade due to the mismanagement and callousness displayed in the strike which could be the straw that broke the camel's back.”

(Reporting by Alison Lampert and David Shepardson. Additional reporting by Shivansh Tiwari; Editing by Rod Nickell, David Gregorio and Diane Craft)