Boeing Temporarily Furloughs Thousands of Employees in Response to Ongoing Strike

Nitin Konde, Apoorva Bajj

Sep 20, 2024 — 3 min read

Boeing Temporarily Furloughs Thousands of Employees in Response to Ongoing Strike

After around 30,000 machinists went on strike recently, Boeing said on September 18 that it would temporarily furlough tens of thousands of employees. This decision was made in response to the strike, which halted manufacturing of Boeing's best-selling 737 MAX and other airplanes.

In an email sent to staff, CEO Kelly Ortberg announced that the company will be implementing temporary furloughs over the next few days. These furloughs will affect a significant number of executives, managers, and employees residing in the United States. During the strike, "we intend to implement a rolling furlough policy in which those employees who have been selected will get one week of leave every four weeks," Ortberg said.

The strike, which is Boeing's first since 2008, is added to an already turbulent year for the aircraft manufacturer, which began in January when a door panel on a brand-new 737 MAX jet blew apart while it was in the air.

Additionally, Ortberg stated that he and other officials at Boeing "will take a commensurate pay reduction for the duration of the strike."

During two days, conversations were held between Boeing and the International Association of Machinists and Aerospace Workers. Federal mediators were present during these discussions. After expressing its dissatisfaction with the first day of mediation, the union said that it had ended yet another day of negotiations with "no meaningful progress."

Boeing’s Trouble Will Continue

The widespread furloughs are evidence that Ortberg is getting the firm ready to endure an extended strike, the ire of which is likely to make a quick resolution quite unlikely.

A prolonged labor dispute might end up costing Boeing several billion dollars, which would put more strain on the company's finances and put its credit rating in danger.

Ben Tsocanos, the aerospace director at S&P Global Ratings, stated that it is highly improbable that the savings will be able to completely compensate for the expenses that stem from a lengthy strike.

In its first complete contract negotiations with Boeing in sixteen years, the union has been pressing for a raise of 40 percent over a period of four years. This is far more than the offer of 25 percent that the planemaker made, which was resoundingly rejected.

However, these actions, which included furloughs and a reduction in salary, amounted to "smoke and mirrors," considering that the corporation had previously spent money on bonuses and remuneration for top executives.

To provide the impression that the company is attempting to cut costs, this is merely a component of their overall strategy.

Disruptions in Production

As a result of the strike, Boeing's manufacturing of 737 MAX narrowbody jets, as well as its widebody aircraft, the 777 and 767, has been halted, which has caused delays in the delivery of these aircraft to airlines.

A prominent Chinese lessor, on the other hand, has reportedly stated that it placed a new order recently for 50 MAX airplanes, with delivery dates ranging from 2028 to 2031. This is an indication that the demand for Boeing aircraft over the longer term is still present.

Due to the fact that the manufacturer's balance sheet is already loaded with $60 billion of debt, the factory said that it would be freezing recruiting in order to cut costs.

As a further measure that will be detrimental to its suppliers, the corporation has also ceased placing the majority of its orders for parts for all Boeing jet programmes, with the exception of the 787 Dreamliner.

A senior supplier referred to the most recent announcement as "panic mode" and stated that it highlighted the fact that Boeing has little room for maneuvering due to the fact that its balance sheet is already under a lot of strain.