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.
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 If anything, tensions between management and the union have been increasing, with Boeing even having withdrawn its offer from earlier in the week.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?
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