Some 33,000 machinists at the Boeing Company are on strike after rejecting a contract proposal, and the longer it goes on the worse it could be for the aviation industry.
For one, Boeing is already dealing with enough problems and scrutiny stemming from the January 5 incident in which a door panel blew off an Alaska Airlines plane in midair. It was revealed that the company has been losing money for years.
A strike not only slows down production but slows Boeing from salvaging its battered reputation.
A lengthy strike would also virtually halt production of the 737 Max, Boeing’s best-selling plane. TD Cowen analyst Cai von Rumohr said the current walkout could last into mid-November.
“Boeing needs to keep making these (planes) because Boeing has been hemorrhaging money because of their safety problems,” said Art Wheaton, director of labor studies at Cornell University’s School of Industrial and Labor Relations. “And safety problems are quite often caused by understaffing.”
Fitch Ratings said Boeing’s credit rating wouldn’t feel the effects of a one- or two-week strike but Boeing work stoppages have traditionally averaged about six weeks. So, airlines and airline passengers might not feel the pinch right away, but as the holidays draw close they will.
Boeing has been able to survive previous strikes, but this one comes amidst heightened scrutiny and federal inquiries into safety protocols. For instance, a strike 16 years ago cost the company $100 million daily. But it was obviously able to weather the storm. There seems to be some uncertainty about what a lengthy strike would mean this time.
“Boeing has every incentive to negotiate a deal in good faith, and within a short time frame,” analysts from RBC Capital Markets wrote in a note Friday. “Any prolonged delay” would “put significant strain” on the company’s free cash flow.”
It was also estimated that United States-based airlines would be most impacted. Alaska Airlines, American and United combined were expecting to receive at least 33 planes by the end of the year – a prolonged strike could inhibit that.
Southwest Airlines also receives most of its blamed from Boeing.
“Earlier this year, Southwest Airlines took steps to address potential delivery disruptions," the carrier said. "As a result, we currently have the fleet needed to fulfill our upcoming schedules. We remain in close communication with Boeing.”
"There will probably be very little direct impact on consumers as a result of the Boeing strike," analyst Harry Harteveldt told NBC News.
But most analysts do not expect the strike to last that long, because this time Boeing is in a particularly vulnerable position and is likely to settle.
“We remain committed to resetting our relationship with
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Boeing’s new chief executive on Friday announced plans to reduce its work force by 10 percent, or about 17,000 jobs, as he seeks to restructure the company in an effort to slash costs and improve production of planes, which has been plagued by numerous delays.
A bitter war of words has erupted between Boeing and a major labor union. Late on Tuesday, the planemaker withdrew a pay offer to 33,000 striking workers. The development increases the likelihood of the dispute dragging on, placing further aircraft deliveries to airlines in jeopardy.
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