Boeing machinists are set to cast their votes on Wednesday regarding a tentative labor contract, which could potentially bring an end to a protracted strike that has persisted for weeks.
The strike, initiated on September 13, has already resulted in significant financial losses for the company, its shareholders, and the employees involved, costing billions of dollars.
The proposed contract offers a 35 percent wage increase over the next four years, a one-time ratification bonus of $7,000, and enhanced retirement benefits, as detailed by the International Association of Machinists and Aerospace Workers (IAM), which represents around 33,000 striking workers in the Seattle and Portland areas. However, there are no assurances that union members will approve this new agreement. Previously, the union had sought a 40 percent wage increase and the reinstatement of a defined-benefit pension plan—demands that have not been fully addressed by the company. Last month, union members overwhelmingly rejected a tentative agreement that included a 25 percent wage increase over the same four-year period.
Even if the strike concludes with a new contract, Boeing faces a challenging road ahead. The company has been dealing with reputational and regulatory challenges stemming from a January incident in which a door of a Boeing aircraft blew out during an Alaska Airlines flight. This event has led to increased scrutiny from Congress and regulators, as several whistleblowers have raised concerns regarding Boeing’s safety practices.
In response to these challenges, the Federal Aviation Administration (FAA) has intensified oversight of Boeing. The agency has mandated that the company develop a comprehensive plan to enhance safety measures, conduct weekly meetings with FAA leaders, and comply with additional inspections. Boeing has submitted an 11-page safety plan to the FAA and claims to be cooperating fully with regulatory requirements.
Boeing has also experienced production slowdowns for its 737 Max and 787 Dreamliner models. Recently, CEO Kelly Ortberg announced delays in the first deliveries of the 777X passenger jet and the phasing out of the 767 Freighters by 2027. In an email to employees on October 11, Ortberg revealed plans to lay off 10 percent of the workforce, highlighting the difficult position the company finds itself in and the need for structural changes to ensure long-term competitiveness.
The fallout from these incidents raises concerns about Boeing’s long-term viability, particularly within its defense sector, which provides a reliable revenue stream and funding for research and development. Experts note that the company faces a mix of vulnerability and public scrutiny, questioning whether it will maintain access to crucial government contracts that support its advanced technologies in space and defense.
Boeing’s defense business has been flagged for potential substantial losses, with analysts from S&P Global Ratings suggesting that the company may downgrade its credit rating to junk status. The ongoing strike and the company’s financial difficulties could lead to a significant cash outflow, projected to reach $10 billion this year, which may further delay recovery efforts.
As Boeing prepares for its earnings call on Wednesday, Ortberg is expected to address these financial challenges and the state of the defense sector, which represents a significant portion of Boeing’s revenue—about 37 percent in 2023. With the US government as one of its largest customers, any disruptions in this relationship could severely impact Boeing’s revenue model.
