Earlier I wrote about how the Boeing 777X has officially been delayed until 2026. That’s something that specifically impacts airline passengers, given how many airlines are counting on this jet for growth. However, in this post I wanted to focus on the context for this announcement, which is Boeing’s grim third quarter 2024 results.
In addition to losing billions of dollars, the company plans to lay off around 10% of its workforce, discontinue the 767 freighter, and more.
In this post:
Boeing is in turmoil, plans reorganization
For the third quarter, Boeing expects to report a pretax loss of $3 billion on its commercial airplane division, and $2 billion on its defense business, on a total of $17.8 billion in revenue. The company expects to report a loss of $9.97 per share for the quarter, and expects to have operating cash outflow of $1.3 billion.
Boeing’s new CEO, Kelly Ortberg, is taking some drastic actions to address the current situation. As he describes the changes in a memo to employees:
“Our business is in a difficult position, and it is hard to overstate the challenges we face together. Beyond navigating our current environment, restoring our company requires tough decisions and we will have to make structural changes to ensure we can stay competitive and deliver for our customers over the long term.”
For one, Boeing plans to cut 10% of its workforce — the company has around 170,000 employees, and plans to lay off around 17,000 of them. Job cuts always suck, so ugh…
One of Boeing’s most immediate challenges is that the company’s machinists went on strike on September 13, 2024, so we’re reaching the one month mark of this industrial action. This strike is costing the aerospace giant more than $1 billion per month, and there’s no sign of the current situation changing. If anything, tensions between management and the union have been increasing, with Boeing even having withdrawn its offer from earlier in the week.
Next, Boeing is pushing back delivery of its first 777X jet until 2026, though that has more to do with certification delays, than anything else. On top of that, Boeing intends to stop producing 767 freighters as of 2027, upon fulling its remaining orders.
It can’t be overstated the extent to which everything is currently broken at Boeing, from employee relations, to government relations, to the commercial business, to the defense business.
How can Boeing recover from this mess?
It’s pretty wild how the situation at Boeing keeps going from bad to worse. Any time you think it can’t possibly get worse, it does. It’s perhaps a good time to step back and consider the comments that Boeing’s (now former) CEO, Dave Calhoun, made less than a year ago, almost painting a rosy picture of the situation:
“We continue to progress in our recovery and despite near-term challenges, we remain on track to meet the financial goals we set for this year and for the long term. We are focused on driving stability in our supply chain and improving operational performance as we steadily increase production rates to meet strong demand. The important work we’re doing to add rigor around our quality systems and build a culture of transparently bringing forward any issue, no matter the size, can bring short-term challenges — but it is how we set ourselves on the right course for our long-term future. Leading with safety, quality and transparency, we will continue to restore our operational and financial strength.”
2024 was supposed to be a turnaround year for Boeing, getting production back on track, finalizing certification of the 777X, etc. But instead, the situation got even worse. Was what Calhoun said at the time accurate? Was he not being very honest? Was he being misled by those reporting to him?
Keep in mind that Boeing’s new CEO just took on his role a couple of months ago. He seems like the right guy to get the job done, and I appreciate that he’s an outsider. However, he’s in an unenviable position, and obviously the company can’t be transformed overnight.
This whole situation raises the question of whether Boeing just has the perfect storm of problems right now, and this is rock bottom. Or is Boeing’s lack of focus on quality catching up with the company in a way that can’t be fixed in the coming years?
On some level, Boeing is “too big to fail,” in the sense that it has so many important government defense contracts. At the same time, one wonders if the point may come where Boeing has to be nationalized, or something, because one almost has to wonder if the company can exist in the free market.
The funny thing is, while I’m not optimistic, I could also see a planet on which Boeing’s situation is actually looking fairly good in 2026, at least on the commercial side. 737 MAX and 787 production could be back to maximum levels, and the 777X could be flying for airlines. However, the planet on which that’s the reality might not be earth. 😉
Bottom line
Boeing is currently in an absolutely awful situation. The company lost billions in the last quarter, with its machinists actively on strike, its newest plane delayed even further, and increased scrutiny from the government.
The company is now taking decisive action, and plans to lay off 10% of its workforce, along with ending the 767 freighter program. Only time will tell how this plays out, but the current reality isn’t pretty.
What do you make of Boeing’s situation? Do you think this is rock bottom, or only the start of even bigger challenges?
Boeing went from a company focused on engineering to a company focused on DEI. They no longer innovate. Look at the number of potential loss orders because they don't have a plane that can compete with the A321neo.
Boeing execs and managers should be in prison! They've killed hundreds of innocent people.
They thought they were going to get richer by cutting corners, lying, and cheating, and now they're learning the hard way that it doesn't pay to be greedy, immoral assholes!!!
Most importantly, will they still keep enough of the budget allocated to taking care of whistleblowers? ;)
Break up commercial from defense/space, and let commercial fail. Defense will have no troubles with all the fat, gratuitous, and padded government contracts it gets.
Exactly this, commercial is currently the bread & butter part of the business but that is being eroded, however defence is something that the US Gov will not allow to fail and will step in if there is a risk of failure.
The problem isn’t the unions but rather the executives with their ultra high bonuses. Sure go after a simple worker who’s trying to stay afloat or trying to keep a health insurance but it’s ok for execs with ridiculously high and unjustified pay.
Greed will cause capitalism to fail! This constant race to increase (not just maintain) profit at the expense of proper engineering and testing will destroy companies and communities.
From this side of the pond it would appear that Boeing is sliding down the equivalent of the slippery nationalised industries slope.
Woke, inept empire building management, who are only interested in their own success and the rewards for their failures, are being ‘waged’ by the all powerful anti-capitalist unions.
Nothing to do with being "woke".
Also, given how much modern day capitalism sucks, maybe the unions being anti-capitalist isn't the worst thing in the world.
Ayn Rand warned us of communism destroying our productivity and causing a situation where we can no longer achieve things that we could in the prior decades. It is ironic that her warnings (in part) caused us to unleash unrestrained capitalism in the Reagan years, causing the exact thing we were supposed to be preventing.
Actually, it’s the opposite of capitalism that has led us here. We have management and unions enriching themselves at the expense of shareholders because the government, using force, protects union racketeering and blackmail. They also protect management who rob the company with outrageous pay packages for poor performance. Government protects the fund managers who vote for the shareholders of the index funds and that’s why shareholder voting is basically a rubber stamp process for the...
Actually, it’s the opposite of capitalism that has led us here. We have management and unions enriching themselves at the expense of shareholders because the government, using force, protects union racketeering and blackmail. They also protect management who rob the company with outrageous pay packages for poor performance. Government protects the fund managers who vote for the shareholders of the index funds and that’s why shareholder voting is basically a rubber stamp process for the establishment. If the government actually goes after managers or employees, guess who winds up paying the settlements: the shareholders.
That is nonsense. Companies are sacrificing quality and customer service for enriching shareholder value. Even in times of loss, management are still getting way overvalued and undeserved bonuses. And how many times have we seen announcements of mass firings at companies followed by reports of record earnings?
Capitalism is what brought us here.
The sooner Comac displaces Boeing as an aircraft manufacturer of scale, the better. Bring on competition.
Boeing prioritises profit over safety, as seen with the MAX incidents amongst others. Not to mention the company is an active supporter of Israel in its genocide in Gaza.
Airbus is waiting to get their lawyers involved soon as they announce a bailout! I see a huge EU fight over this and china involved also the pot vs kettle, they will get the money but this will cause a mess politically with airbus and they will ask for concessions I see them taking this to court and arbitration same way boeing did.
The current situation of Boeing is uncannily similar to the state of the UK's economy
Boeing is suffering a perfect storm of troubles…. which Boeing itself is quick to point out. Boeing isn’t so eager to talk about how they’re leveraging the companies problems to pit labor against itself or the fact that the companies own lies and arrogance are what brought the situation to this point.
Remember this the next time some company claims everyone will be better off if they get to be a monopoly.
Nationalized? That's your solution?
Ok, I can stop reading you now
do you realize how important Boeing is to the US economy?
Do you know that the US has TEMPORARILY nationalized other companies that have far less impact?
Boeing is a mess and I am not sure we are at the point of talking openly iin Washington about bailing Boeing out but there are not many companies that could absorb Boeing or even parts of it and turn it around - esp. their commercial aircraft...
do you realize how important Boeing is to the US economy?
Do you know that the US has TEMPORARILY nationalized other companies that have far less impact?
Boeing is a mess and I am not sure we are at the point of talking openly iin Washington about bailing Boeing out but there are not many companies that could absorb Boeing or even parts of it and turn it around - esp. their commercial aircraft division.
The irony is that Boeing ran around accusing Airbus and Bombardier of being subsidized and now Boeing will very likely need some sort of government financial intervention to turn things around.
and those that suggest bankruptcy - do you understand what that involves and can you explain how Boeing will be better off after it?
That's not how capitalism works, Tim Dunn. Let them fail and allow the ashes to create multiple firms from the remnants. More innovation. More competition. The Govt. will only protect the defense contracts and production. Nothing else. As it should be.
It's painful, but this should be a lesson in that no one company should dominate like this. Especially in such a vital industry. Especially given that they turned to shareholders first and left quality behind.
We should be so lucky
I think they will declare bankrupcy and parts broken off. An investment company will pick up the commercial airline business. Defense and Space will be sold off.
Think "GE"
@Ben - “At the same time, one wonders if the point may come where Boeing has to be nationalized, or something, ”
A lot needs to be done, and goodness knows the degree of issues that need to be fixed, but Boeing isn’t going to be nationalized.
that's a profit margin of -28% -- at which point do they just declare Chapter 11?
Boeing should play hardball with the striking union workers, i.e. "Do you want to work with us or have no work at all as we go into bankruptcy?"
Some companies layoff 5-10% of their workforce every year.
NOOOOOOOOOOO!!! I hope the new CEO can fix this up. It will be much cheaper to meet the employees' new contracts than to have no machinists. Next up, all of Boeing's workers go on strike, quit their jobs, and Boeing files for bankruptcy. Real Shame
I'm now retired but worked at a variety of companies, including the government. I was lucky to work for some great organizations and some bad ones and observed a couple of things.
First, it takes a lot of work and effort to build a quality organization with good workers and managers. Managers that aren't clueless (afraid my actual term would not be allowed) can be hard to find.
When you have a good team,...
I'm now retired but worked at a variety of companies, including the government. I was lucky to work for some great organizations and some bad ones and observed a couple of things.
First, it takes a lot of work and effort to build a quality organization with good workers and managers. Managers that aren't clueless (afraid my actual term would not be allowed) can be hard to find.
When you have a good team, everyone works harder because no one wants to let anyone down.
Unfortunately a great organization can be destroyed quickly with bad management. Usually it takes a while to start but once a couple of people leave, others look around and say "why stick around for this?" and leave.
Boeing is seriously broken, maybe not dissimilar to our society, and it won't be easy to fix. They clearly have some seriously poor management and finding them and removing them will take some good high level executives time.
It is interesting that at the low levels workers usually know who does what and who doesn't and isn't worth keeping but each higher level is further removed from knowing this and often judge people on personalities which isn't worth 2 cents.
17,000 people losing their jobs isn't good but I'm sure Boeing has at least that many poor performers, unfortunately the odds are low that they are removing the bad ones but just a random mixture of employees.
It will likely be last in first out, so the cancer deeply embedded in the company will continue.