American airline manufacturer, Boeing has reported a quarterly loss of $6.2 billion as the financial woes rocking the airlines manufacturer continues.
These challenges are primarily due to labor disputes and expenses associated with the company’s defense and commercial aircraft programmes.
Boeing’s Woes
Over the last six years, Boeing has gone through one problem after another, ranging from embarrassing to tragic especially after two 737 Max crashes killed 346 people, a tragedy for which the company agreed to plead guilty to deceiving the Federal Aviation Administration during the certification process for the plane.
In October,2018, Lion Air Flight 610, a Boeing 737 Max 8 plunged into the Java Sea off the coast of Indonesia minutes after takeoff from Jakarta, killing all 189 people on board.
Another crash occurred in March, 2019 when an Ethiopian Airlines Flight 302, a Boeing 737 Max 8, crashed after take-off from Addis Ababa, Ethiopia, killing 157 passengers and crew members.
Investigation for both crashes revealed Boeing did not disclose its new flight-control system called MCAS to pilots and airlines.
Indonesian investigators said the Flight 610 pilots struggled for control as the automated system pushed the nose of the plane down more than two dozen times while in the Ethiopian incident, preliminary report by Ethiopian officials revealed that Flight 302 pilots tried to follow Boeing instructions for an MCAS malfunction but couldn’t level the nose manually because of the plane’s high speed.
In the aftermath of these crashes Boeing disclosed a safety alert to warn pilots about bad readings from a key sensor on the Max did not work, but the company did not tell airlines or FAA about the problem until after the first Max crash.
Boeing’s Legal Battles
In January 2021, the U.S. Justice Department charged Boeing with fraud but said it won’t prosecute the company for misleading regulators about the 737 Max if the company paid a $2.5 billion settlement and tightened protections against violating fraud laws for three years.
In September 2022, Boeing agreed to pay $200 million and former Boeing CEO Dennis Muilenburg who was ousted in 2019, for trying to pressure the FAA to lift the grounding order on the Max agreed to pay $1 million to settle Securities and Exchange Commission charges that they misled investors by saying one month after the Lion Air crash the 737 Max was “as safe as any airplane that has ever flown the skies” even though the company had determined MCAS posed a safety risk in need of repair.
By January 2024, Alaska and United Airlines revealed they found loose hardware on a number of their Boeing 737 Max 9s, which for days have been grounded nationwide for inspections marking the latest in a series of safety threats associated with Boeing.
In July 2024, Boeing agreed to plead guilty to conspiracy to defraud the U.S. government for misleading regulators who approved pilot-training standards for the Max. A written plea agreement is expected to be filed with the court by July 19.
Boeing’s Financial Challenges
Within days of the second crash, the U.S. Federal Aviation Administration and regulators in nations around the world ordered the grounding of all 737 Max jets leading to massive operational losses for Boeing.
This situation coupled with the impact of its legal battles with the FAA put Boeing almost on the brink of bankruptcy with the company having not registered profits since 2018.
Since 2019, Boeing has lost more than $32 billion but despite its many woes, the company has a backlog of orders for more than 5,600 commercial jets, worth $529 billion with the problem being that Boeing has reduced its pace so much to address the quality issues that put it in a precarious situation originally, meaning it can’t make enough planes a year to turn a profit.
The company reported a loss of $9.97 per share for the period ending September 30, with an adjusted loss of $10.44 per shares. Company shares experienced a slight decline of 1% in pre-market trading.
New CEO Has Work Cut Out
In the midst of challenges facing the aircraft manufacturer, Boeing announced Robert “Kelly” Ortberg, former CEO of supplier Rockwell Collins, as its new CEO, in August, replacing retiring Boeing CEO Dave Calhoun, who had been under fire for the company’s problems.
Ortberg currently has his hands full fixing the problems at Boeing, which has not posted a profitable year since 2019.
Since then, its core operating losses totaled $33.3 billion in addition to the quarterly loss of $6.2 billion announced on Wednesday with Boeing having difficulty returning to profitability until it can convince regulators that it has fixed problems with the safety and quality of its jets.
Acknowledging this, Ortberg noted “It will take time to return Boeing to its former legacy, but with the right focus and culture, we can be an iconic company and aerospace leader once again,”
He has already initiated large-scale layoffs and come up with a plan to raise sufficient funds to prevent bankruptcy.
He must also persuade federal regulators that Boeing is addressing its safety culture and is prepared to ramp up production of the 737 Max, a critical step in generating much-needed revenue to keep the company afloat.
Boeing’s Fate Rests on Union Workers’ Vote
Boeing’s ability to bounce back from its woes would rely upon the direction the votes of its workers who have been on strike for five weeks.
33,000 machinists, have been on strike for the past five weeks, halting production at Boeing’s assembly plant in the seatle region.
The International Association of Machinists and Aerospace Workers is expected to announce the results of a vote by the striking workers on whether to accept Boeing’s offer and return to work or not.
The proposal put forward by Boeing includes a 35% pay increase over a four-year period, a $7,000 ratification bonus, and the preservation of performance related bonuses that Boeing had initially sought to remove.
However, Boeing has refused to meet the union’s request for the reinstatement of the traditional pension plan, which was halted ten years ago, only agreeing that older employees would receive a modest increase in their monthly pension payments.
The Road Ahead for Boeing
Depending on the direction of the votes by the International Association of Machinists and Aerospace Workers, Boeing faces an uphill task in turning its financial situation around.
This is due to the backlog of airline demand the company has not been able to deliver upon due to the strike by its workers as well as the eroding trust in the company amongst its customers and investors.
Boeing’s CEO would hope he can get the machinists to work in no time so as to help the company meet its production responsibilities, failing which the company is set to continue its trajectory of yearly losses come the end of the year.
