Striking Boeing machinists will vote Wednesday on a tentative labor contract that may put to rest a weeks-long strike, but not questions about the company’s future.
The stakes for the vote are high: The strike has cost the company, shareholders and employees billions of dollars since workers walked off the job on Sept. 13.
The financial squeeze has put additional pressure on Boeing as it makes critical safety changes and seeks to repair relations with customers and policymakers after the door of a Boeing plane blew out during an Alaska Airlines flight in January.
The proposed agreement includes a 35 percent wage increase over four years, a one-time ratification bonus of $7,000 and beefed-up retirement benefits, according to the International Association of Machinists and Aerospace Workers (IAM), which represents the 33,000 Boeing workers striking around Seattle and Portland.
There is no guarantee members will approve the new contract. The union has been pushing for a 40 percent wage increase over four years and the reinstatement of a defined-benefit pension plan, demands the company has not met. Members overwhelmingly voted last month to reject a tentative agreement that would have raised wages by 25 percent over four years.
Even if Boeing and the union are able to conclude the costly strike, it won’t be clear skies ahead for the embattled company.
Boeing has taken reputational and regulatory hits since the Alaska Airlines incident, which prompted congressional hearings featuring numerous whistleblowers who raised concerns about Boeing’s safety culture and policies.
The Federal Aviation Administration (FAA) has ramped up oversight of Boeing, directing the company to develop a comprehensive plan to address safety issues, hold weekly check-ins with senior FAA leaders and cooperate with increased inspections.
Boeing, which submitted its 11-page plan to the FAA in May, says it has worked transparently with regulators since the incident in January.
Production of the Boeing 737 Max and 787 Dreamliner have slowed as part of this process, and Boeing CEO Kelly Ortberg recently announced plans to delay the first deliveries of the company’s new 777X passenger jet and sunset 767 Freighters production by 2027.
Ortberg also recently announced Boeing would be laying off 10 percent of its workforce in an email to employees on Oct. 11, which a Boeing spokesperson pointed The Hill to when asked about the company’s long-term recovery plans.
“Our business is in a difficult position, and it is hard to overstate the challenges we face together,” Ortberg wrote in the email. “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 fallout has raised questions about the company’s long-term recovery, particularly in its defense business, which provides a stable stream of revenue and research and development funds for the company.
“They have this mix right now of vulnerability and public scrutiny,” said Anat Alon-Beck, an associate professor of law at Case Western Reserve University who specializes in corporate law and governance.
“So how are they going to do that with all the challenges Boeing is currently facing?” Alon-Beck asked. “Is Boeing going to continue to have access to government-funded projects that are going to help it with its cutting-edge technology like space exploration and advanced defense systems? Because that gives Boeing a competitive edge in commercial and defense.”
Ortberg warned in his email of “substantial new losses” for the company’s defense business, which S&P Global Ratings said “remains unprofitable as it is currently working to address cost overruns on its fixed-price development contracts.”
The U.S. government is one of Boeing’s biggest customers, accounting for approximately 37 percent of the company’s revenue in 2023.
Boeing is also one of the government’s “Big Five” contractors. The government obligated $23.8 billion to Boeing in 2023, including $22.1 directly from the Department of Defense, according to contracting data published by the government.
“If you start playing with that, that really disrupts your company revenue model. It’s going to be very challenging for Boeing, if that model is going to be disrupted in the future,” Alon-Beck said, noting there is “quite a bit of competition” in the defense industry from new players such as Elon Musk’s SpaceX.
Ortberg is expected to expand upon defense business losses and the company’s financials during the company’s closely watched earnings call Wednesday morning, his first since taking over as CEO in August.
Analysts are expecting large losses and weak sales after Ortberg’s emails dashed investor hopes that Boeing may bounce back in the third quarter.
Citing strike-related financial risk, S&P Global Ratings earlier this month said it might downgrade Boeing’s credit rating to junk. It also forecasts Boeing could burn through $10 billion in “cash outflows” this year and that target production for the 737 Max could be pushed to mid-2025.
“We believe the company remains exposed to higher-than-expected cash usage and adjusted debt for the next year or two, which could further delay the expected recovery in its credit measure to levels we view as consistent with the rating,” according to the S&P Global Ratings analysis.
To help plug the massive cash outflow, Boeing recently disclosed plans to raise up to $25 billion through debt and stock sales and an agreement with several banks to secure a $10 billion line of credit.