Boeing Announces 17,000 Job Cuts in Restructuring Effort Amid Mounting Losses

Created on 12 October, 2024 • News • 227 views • 5 minutes read

Boeing, the aerospace giant, has revealed plans to cut approximately 17,000 jobs

Boeing, the aerospace giant, has revealed plans to cut approximately 17,000 jobs, which represent about 10% of its global workforce. This decision comes as part of a broader strategy to restructure the company and reduce operating costs, as Boeing faces significant financial losses and ongoing production issues. The announcement was made by the company's new chief executive, Kelly Ortberg, who has been tasked with steering Boeing through one of its most challenging periods in recent history.

Leadership's Response to Financial Troubles

Ortberg, who took the helm of Boeing in August 2024, has been candid about the company’s current predicament. In a memo addressed to Boeing’s 170,000 employees, Ortberg described the financial strain Boeing has endured in recent years. Since 2018, Boeing has not reported a profitable year, with losses mounting to more than $33 billion in the last five years. The financial troubles are compounded by production delays and quality control issues across both commercial and defense programs, making it critical for the company to restructure.

The layoffs, according to Ortberg, will affect employees across all levels, including executives, managers, and production workers. “Our business is in a difficult position, and it is hard to overstate the challenges we face together,” Ortberg said in his memo. The job cuts, alongside other cost-cutting measures, are intended to help Boeing regain its competitive edge in the aerospace industry.

A Troubled Five-Year Period

Boeing’s challenges can be traced back to several key incidents that have eroded both the company’s financial health and its reputation. The most notable of these was the two fatal crashes of Boeing's best-selling aircraft, the 737 Max, in 2018 and 2019. The crashes led to a 20-month grounding of the jet globally, significantly impacting Boeing's commercial operations. These events prompted a wave of investigations into the safety and manufacturing processes at Boeing, bringing increased scrutiny from regulators.

Further compounding these issues was the COVID-19 pandemic, which caused a near-total halt in air travel, leading airlines to cancel or defer new plane orders. Even as travel rebounded in the post-pandemic era, Boeing has struggled to meet demand due to production bottlenecks and quality issues. A recent incident in January 2024, in which a door plug on a Boeing 737 Max blew off mid-flight, has raised fresh concerns about the company's manufacturing quality. An investigation revealed that the plane had left a Boeing factory without the four necessary bolts to secure the door plug.

Production Issues and Delays

In addition to the well-documented struggles with the 737 Max, Boeing’s defense and space divisions have also faced significant challenges. One of the more high-profile setbacks occurred with the company’s Starliner space program. Designed to transport astronauts to the International Space Station, the Starliner spacecraft encountered multiple technical difficulties, including leaving astronauts stranded on the ISS for months.

The company’s wide-body commercial aircraft programs have not fared much better. Boeing’s newest plane, the 777X, has been plagued by delays, with its first delivery now postponed to 2026, according to Ortberg. The company had previously halted test flights due to unresolved technical problems. Boeing also announced it will discontinue production of the 767 jet, which is currently only being manufactured as a freighter. Production will cease once all existing orders are fulfilled by 2027.

Strike and Union Tensions

Adding to Boeing's woes is a strike by members of its largest labor union, the International Association of Machinists and Aerospace Workers (IAM). The strike, which began in mid-September 2024, has brought much of Boeing’s commercial aircraft production to a standstill. The union represents over 33,000 employees at Boeing, and its members rejected the company’s offer of a 25% wage increase over four years. The rejection came amid broader concerns about working conditions, including the union's longstanding grievance over the loss of traditional pension plans a decade ago.

In an attempt to resolve the strike, Boeing has since raised its wage offer to a 30% increase, but union leadership has stated that this is still insufficient. Negotiations between the two sides have reached an impasse, with federal mediators unable to bridge the gap. The strike is estimated to be costing Boeing around $1 billion per month in lost production and sales, further exacerbating the company’s financial difficulties.

Impact on Boeing’s Future

Despite the severe challenges facing the company, Boeing’s position in the aerospace industry remains crucial. The company’s only major competitor in the global passenger jet market is Airbus, but Airbus is already facing capacity constraints. Both Boeing and Airbus have substantial backlogs of plane orders, meaning that airlines would face long wait times if they attempted to switch suppliers. For many airlines, Boeing remains an essential partner, even as the company navigates this turbulent period.

In response to the job cuts and restructuring plans, Ortberg has emphasized the need for Boeing to focus its resources more effectively. “We need to focus our resources rather than spreading ourselves across too many efforts that can often result in underperformance and underinvestment,” he explained in his memo to employees. The layoffs, coupled with cost-saving measures such as rolling unpaid furloughs for nonunion employees, are intended to streamline operations and position Boeing for a more sustainable future.

Financial Woes and Potential Downgrade

As Boeing continues to lose money during the strike, its debt levels have ballooned, raising concerns among credit rating agencies. Standard & Poor’s recently warned that Boeing’s credit rating could be downgraded to junk bond status for the first time in the company’s history. Such a downgrade would increase the cost of borrowing for Boeing, potentially complicating its ability to invest in future projects or maintain current operations.

While the financial situation is dire, Boeing remains optimistic that the restructuring and cost-cutting measures will stabilize the business in the long term. Ortberg has acknowledged the pain the layoffs will cause for affected employees, but he stressed the necessity of these actions for Boeing’s survival and eventual recovery. “We know these decisions will cause difficulty for you, your families, and our team, and I sincerely wish we could avoid taking them,” he said.

Boeing’s decision to cut 17,000 jobs marks a pivotal moment in the company’s efforts to recover from years of financial losses, production problems, and regulatory scrutiny. Under the leadership of Kelly Ortberg, the aerospace manufacturer is embarking on a challenging restructuring process aimed at reducing costs, improving efficiency, and restoring its reputation for quality and reliability. However, the path ahead remains uncertain, as Boeing continues to grapple with labor strikes, delayed production schedules, and rising debt. Only time will tell whether the company’s efforts to turn itself around will succeed.