The strike could cost Boeing more than $1 billion. But that could be the least of its problems
CNN
For a company that has lost $33 billion since 2019, a strike that virtually halts production of its major product is the last thing it needs. But that’s the reality for embattled aircraft maker Boeing.
For a company that has lost $33 billion since 2019, a strike that virtually halts production of its major product is the last thing it needs. But that’s the reality for embattled aircraft maker Boeing. How long the strike lasts will determine how serious the problems are for Boeing. If the strike lasts a week or so, it will barely be a blip on the bottom line of a company that has seen debt soar and its credit rating plunge as it sought to cover losses over the last five years. The last strike, which took place in 2008, was a $1.2 billion hit to Boeing’s net income. This strike could be similarly costly if it continues for months, as has happened in past work stoppages at Boeing. “The strike will impact production and deliveries and operations and will jeopardize our recovery,” CEO Brian West told investors Friday, hours after the start of the walkout. Boeing has a long way back to profitability, no matter how long the strike lasts. It is being limited in the rate it builds 737 Max jets, as the Federal Aviation Administration oversees efforts to improve the quality of its assembly line. Boeing’s next planned jet, the 777X, which is crucial to a return to profitability, ran into trouble on its test flights and is years overdue in being certified to carry passengers. Boeing has not had the cash it needs to develop a new model jet to serve the market, and its sales have fallen far behind rival Airbus. So as bad as the strike might be for Boeing, it has plenty of other problems to deal with. A key factor working in Boeing’s favor is that the company is part of a global duopoly with Airbus. Boeing and Airbus are the only manufacturers of full-size commercial jets and demand for aircraft orders is strong, with a backlog stretching for years. If an airline canceled an order with Boeing to make a similar order with Airbus, that airline would be stuck on a waiting list for years. And once an airline orders one model of a jet, they’re pretty much locked into using that model, because owning a competing model from the other manufacturer significantly increases operating costs. So even with financial problems that might kill another company, Boeing isn’t going anywhere.
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