Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
3Q Earnings reports kick off this week
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By Scott Hamilton
Oct. 21, 2024, © Leeham News: Third quarter earnings reports kick off this week. The most anticipated call will be The Boeing Co.
Boeing previewed a big loss for the quarter on Oct. 11. On Oct. 15, it filed a registration statement with the US Securities and Exchange Commission (SEC) for $25bn in equities, debt, and other securities—money that’s badly needed as it bleeds cash. It also filed another SEC document for a “supplemental” $10bn line of credit. This is in addition to a previous $10bn credit agreement.
Coupled with the $10bn in cash, Boeing potentially has up to $55bn in liquidity.
With the quarter’s loss already pre-announced and the new $25bn liquidity plan filed with the SEC, much of the suspense for Boeing’s earnings call is over. Also on Wednesday, the company’s largest union, the IAM 751 workers, vote on a new contract offer to end a strike closing in on its sixth week. Further color about CEO Kelly Ortberg’s “reset” plan for the company will be closely watched.
Boeing’s earnings call is Wednesday at 10:30 am EDT. The press release will be issued before the stock market opens. The union vote will be announced Wednesday evening.
In addition to Boeing’s earnings call this week, RTX (parent of ailing Pratt & Whitney) and GE Aerospace announce their earnings on Tuesday at 8:30 am EDT and 7:30 am EDT, respectively.
RTX results continue to be dragged down by PW’s continuing technical challenges with the Gear Turbo Fan engines that power the Airbus A220, A320neo and Embraer E-Jet. GE faces a drag on late deliveries and time-on-wing issues with its LEAP engines that power the Boeing 737 MAX and A320neo. GE is also affected by all the production turmoil and IAM strike at Boeing.
Germany’s MTU Aerospace reports on Thursday as well. MTU is a supplier to PW and GE. Safran reports on Friday.
Boeing, IAM reach contract agreement; vote on Wednesday
Oct. 19, 2024, © Leeham News: Boeing and its striking union, the IAM 751, announced a new agreement this morning on an improved contract offer.
The IAM summarized the new offer here. The highlights:
Boeing: Breaking Up is Hard to Do
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By Karl Sinclair
Oct. 14, 2024, © Leeham News: As newly minted CEO Kelly Ortberg struggles to deal with striking workers from the International Aerospace Machinists (IAM) union in the Seattle and Portland (OR) areas, calls continued for the Boeing Company (BA) to shed one or more of the divisions that make up the corporate entity.
Some point to the turnaround at General Electric, which has now become the standalone GE Aerospace (GE), after a series of divestitures and consolidations into three business units, with two being sold, as a model that Boeing should follow.
While the prospect seems to be rather straightforward, it is far more complex and intertwined than simply throwing up a for sale sign on the front door of an underperforming or unwanted business segment. It might be better to ride out the current storm as a whole and focus efforts on fixing what ails the patient, rather than cutting off a limb.
Where and who will be laid off in Boeing reset?
By Scott Hamilton
Oct. 14, 2024, © Leeham News: As Boeing prepares to lay off about 10% of its workforce of 170,000 employees, the key question remains unanswered:
Who and where will the layoffs come from?
Boeing didn’t say in its Friday announcement, other than in broad terms: “These reductions will include executives, managers, and employees,” CEO Kelly Ortberg said in a message to employees.
“Executives” in the Boeing organization include down to the Director level in management—not just the C or officer level. Union and non-union employees are at risk.
But there was no information about which divisions will be subject to layoffs, or how many in each.
Boeing Commercial Airplanes has the most employees of the three divisions of the company. But the “Enterprise” by far employs more than BCA or the other two units. Figure 1 has the breakdown.
Pontifications: Boeing needs massive reset, and not just with labor
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Now open to all readers.
- CEO Kelly Ortberg’s “reset” plan is long overdue. But Boeing needs to do better for the IAM members, and the members need to give up on the defined pension plan.
By Scott Hamilton
Oct. 14, 2024, © Leeham News: The Friday afternoon announcements by Boeing CEO Kelly Ortberg of a 10% employee reduction, termination of the 767 commercial airliner in 2027, and recognition that commercial and defense programs need drastic surgery is long overdue.
When Ortberg became CEO on Aug. 8, he said one of his top priorities was to “reset” relationships with labor. So far, this hasn’t worked out. But it’s the entire company that needs a reset. And this has been a long, long time coming. I’ll detail this below. But first, let’s talk about the contract talks between the company and the largest union, the IAM 751.
Members, 33,000 of them, walked out on Sept. 13 at 12:01 am. Production of all commercial airliners except the 787 ceased. Production of the commercially-based P-8 and KC-46A also came to a halt, as have all deliveries from Washington State.
Negotiations broke off entirely last week and Boeing withdrew its Best and Final Offer (BAFO). Both sides blamed the other, and competing Unfair Labor Practices complaints have been filed with the National Labor Relations Board. (NLRB).
One of the key areas of dispute: the size of the wage increase. But other factors, such as health care, go into total compensation. Boeing’s total compensation not only lagged others in aerospace, it’s had negative growth since 2018.
Read more
How Boeing’s actions affect Products, Airbus: Analysis (Update)
Updated Oct. 12 with new and clarifying information.
By Scott Hamilton
Oct. 11, 2024, © Leeham News: Boeing’s late announcement today of a 10% company-wide layoff of its 170,000 leaves a lot of questions.
Boeing managers were told to expect guidance on Monday. As of Saturday, there is no information available about where the layoffs will occur–how many will be from Boeing Commercial Airplanes, for example, vs Boeing’s Defense and Services units.
Boeing’s announcement did not define “executives;” LNA understands that in the company’s organization, “executives” extend down to the Director management level.
Beyond the immediate, announced moves and impacts to Boeing (see Related Article), terminating the 767-300ERF program in 2027 when current orders are filled will hurt the US Air Force KC-46A aerial refueling tanker cost basis. The commercial program absorbed some of the tanker’s program costs. This was one reason cited by FedEx’s founder Fred Smith to support extending production beyond 2027 when new international emissions regulations render the civilian version ineligible to continue.
Pushing entry-into-service of the 777-9 to 2026 and the 777-8F into 2028 should benefit Airbus with sales of the A350. Its largest passenger version, the -1000 model, is smaller than the 777-9 by nominally 60 passengers. But some airlines consider the -9 too big anyway. Airbus has few near-term production slots available for the A350, so any delay for the 777-9 benefits Airbus.
The same holds true for the 777-8F. Airbus offers a freighter version of the A350 and further delays of the 777-8F should benefit Airbus.
Airbus has a goal to produce 10 A350s a month in 2026. The line is essentially sold out then and slightly oversold in 2027. But the wing factor in Wales has a capacity of 12-13 shipsets a month; it’s unclear what the current capacity of the A350 final assembly line in Toulouse is. The pacing item remains with the supply chain capacity.
Related Story
Boeing Announces Preliminary Significant Q3 Loss: Cuts 767 Freighter Program, Delays 777X EIS, Major Layoffs
By Chris Sloan
October 11, 2024, ©. Leeham News – In a late Friday news dump just after U.S. financial markets closed, The Boeing Company Announced significant financial hits as the IAM strike lurches toward a full month with no end in sight, nor are further talks scheduled after pulling its latest off the table.
In an email to Boeing staff, Kelly Ortberg, Boeing President and Chief executive Officer, starkly admitted: “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.”
The company announced a multi-prong series of “clear-eyed, difficult decisions” and program updates. The headline is a roughly 10% permanent reduction in the size of the non-represented workforce, many of whom are already on furlough or partial furlough. These reductions will include executives, managers, and employees, who will begin learning their fate next week. The company did say, it will not proceed with the second wave of furloughs for now.
- Boeing reports preliminary third quarter results
- Boeing CEO Message About Positioning for the Future
Boeing strike hits suppliers, Airbus steps in
- Strike creates gap for suppliers.
- Airbus places accelerated orders at some affected suppliers.
- Snapping up capacity may complicate Boeing’s post-strike recovery.
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By Scott Hamilton
Oct. 10, 2024, © Leeham News: There is no end in sight for the strike by the International Association of Machines and Aerospace Workers, District 751, ending its fourth week today.
The strike costs Boeing between $50m and $150m a day, depending on whose estimate you believe. (The world will have an understanding of the cost on Oct. 23, when Boeing reports its third-quarter financial results.)
A strike by the IAM 751 in 2008 lasted 57 days. Boeing lost an estimated $6bn in sales during this period and racked up more than $2bn in lost cash flow. It took Boeing about two years to fully recover from the strike. Then, Boeing didn’t have the overhang that it has today from five years of crises and an irate Federal Aviation Administration that oversees and restricts Boeing’s production.
But recovery, whenever it begins, has a new wrinkle that didn’t exist in 2008. Then, it was Airbus that was in disarray. Its A380 program was in shambles due to production issues. The fledging A350, Airbus’ answer to the Boeing 787, was being redesigned and tweaked for the fourth or fifth time due to poor market reception. The A400M program was an operational and financial disaster.
Today, Airbus is playing from a position of strength and dominance. Boeing is playing from a position of weakness and financial trauma.
Boeing-IAM contract talks fail, no new negotiations scheduled, no end in sight
By Scott Hamilton
Oct. 9, 2024, (c) Leeham News: Contract talks between Boeing and its largest union, the IAM 751, broke off again yesterday after the two sides failed to make progress to reach an agreement.
The strike is four weeks old tomorrow. No new talks are scheduled and there is no end in sight to the strike.
The two sides issued public statements yesterday that make it seem they weren’t even at the same meeting.
Click on image to enlarge. Credit: Boeing, IAM 751.
Boeing 3Q deliveries up despite strike
By Scott Hamilton
Oct. 8, 2024, © Leeham News: Third quarter deliveries by Boeing were up slightly despite a strike the last two weeks of the quarter by its machinists union.
Boeing deliveries 92 737s during the quarter, despite lower new-production rates hovering around +/- 20/mo. The company doesn’t break out deliveries from the lingering inventory of 737s vs new production aircraft. Deliveries of the 787 also are a mix of new-production airplanes and those from inventory that required rework from a production flaw discovered in 2020.
Boeing said deliveries included “new-build production units, including remanufactures and modifications.”
