Boeing Freezes Hiring, Considers Furloughs as Strike Could Cost $3.5 Billion

Boeing has notified employees of a hiring freeze and is considering furloughs in the coming weeks as experts predict significant cash loss for the company this quarter due to an ongoing machinist strike.

Over 30,000 machinists and aerospace workers at the company walked off the job Friday after a large majority of them rejected a tentative contract. A Bloomberg Intelligence analysis predicted Monday that Boeing could be out $3.5 billion in cash in Q3 if the strike continues through September.

According to the Bloomberg report, the cash loss could reduce Boeing’s balances to $9 billion – near the minimum for the company. The largest driver of results in sales will be 737 deliveries, which Boeing will have made 78 of for Q3 versus 70 in Q2. The report stated that defense and Global Services are expected to perform similarly to Q2.

Boeing Cuts Costs

Boeing’s finance chief Brian West told employees in an emailed memo that the company would take actions to preserve its cash, including:

• Starting a hiring freeze across Boeing for all levels, and pausing any pay increases associated with internal executive and management promotions.
• Stopping any travel that is not for critical customer, program, regulatory or supply chain activity.
• Suspending nonessential capital expenditures and facilities spending.
• Suspending outside consultant spending and temporarily releasing nonessential contractors.

“… [W]e are planning to make significant reductions in supplier expenditures and will stop issuing the majority of supplier purchase orders on the 737, 767 and 777 programs,” West said in the memo. “We are also considering the difficult step of temporary furloughs for many employees, managers and executives in the coming weeks.”

Which Airlines Will Be Impacted?

Bloomberg Intelligence stated that airlines most affected by Boeing’s strike will be Ryanair, Southwest, United, and Alaska. While it’s not in the high-demand season, this is expected to predominantly affect U.S. air travel.

The report stated that the most-affected airlines in the near term appear to be Southwest, Alaska, Aeromexico, and Jin Air of Korea, all of which are expecting two deliveries in the remaining half of September. With vacation season waning in the U.S., Bloomberg estimates a minimized impact from delays.

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