Boeing (BA) Faces Mounting Losses Amid Strikes and Supply Chain Issues

Boeing (BA, Financial), a leading global aircraft manufacturer, reported significant third-quarter losses, compounding its challenges amid ongoing strikes, supply chain disruptions, and credit rating downgrades. The company announced a net loss of $6.174 billion, marking a 2.77-fold increase compared to the previous year. Revenue dropped by 1% to $17.84 billion. This marks the largest loss since 2020. Revenue for the first three quarters was $51.275 billion, down 8% year-over-year, with net losses growing by 2.6 times to $7.968 billion.

The quarter’s performance was notably impacted by the International Association of Machinists and Aerospace Workers (IAM) strike and decreased earnings in the commercial aircraft and defense sectors. Boeing’s new CEO, Kelly Ortberg, who assumed the role in August, emphasized that regaining the company’s former glory would require significant cultural and operational changes.

Ortberg’s leadership marks a crucial point for Boeing as it strives for stability after several safety quality crises. Ortberg is focusing on changing company culture, stabilizing business operations, and improving project execution to reestablish Boeing as a leading aerospace company. Boeing shares closed at $157.06, having declined nearly 40% year-to-date.

The commercial aircraft segment had a challenging third quarter, with revenue dropping 5% to $7.443 billion, and an operating loss of $4.021 billion, significantly widening from a $678 million loss the previous year. The business achieved 49 new net orders, delivered 116 aircraft, and holds a backlog worth $428 billion. Production of the 787 Dreamliner is expected to increase from four to five per month by the year’s end. Strikes on the U.S. West Coast affected production lines for models including the 737 MAX, 767, and 777.

Ortberg highlighted the focus on ending the IAM strikes, which have resulted in an estimated $1 billion monthly loss, and rebuilding relationships with labor unions. Recent negotiations for a wage increase of 35% over four years were rejected by 64% of workers, prolonging a strike that has lasted over six weeks.

Boeing is evaluating its portfolio to improve efficiency, focusing on retaining core businesses in commercial and defense sectors while divesting non-core operations. This strategic shift includes plans to cut approximately 10% of its workforce, affecting around 17,000 positions.

Financially, Boeing’s operating cash flow was negative at $1.345 billion, reflecting impacts from reduced wide-body deliveries and ongoing strikes. The company secured a new $10 billion short-term credit line, adding to its $20 billion available credit. Despite the financial strains, Boeing aims to safeguard its investment-grade credit rating, actively engaging with rating agencies like Moody’s and S&P Global Ratings to prevent downgrades to junk status.