Kelly Ortberg, an experienced figure in the aerospace industry, assumed the role of Boeing’s CEO last month during a pivotal period for the company. Boeing has been grappling with numerous issues that have severely damaged its reputation.
In a letter to staff, Ortberg acknowledged the extensive work needed to restore trust but expressed confidence that collaborative efforts would help the company reclaim its position as an industry leader. His immediate challenge is a strike by 33,000 machinists that began on September 13. The International Association of Machinists and Aerospace Workers reported that 94.6% of voting members rejected a contract proposal that included a 25% pay raise over four years; 96% approved the strike.
Analysts from Northcoast Research estimate the strike could cost Boeing around $100 million in daily revenue. According to Ashley Fulmer, an assistant professor of managerial science at Georgia State University’s Robinson College of Business, the new CEO has a limited window to build trust and redirect the company, emphasizing the difficulty of overcoming the emotional fallout from past failures.
On September 23, Boeing presented what it termed its “best and final contract offer,” which proposed a 30% wage increase over four years, up from 25%, and doubled the ratification bonus to $6,000, along with reinstating an annual bonus. IAM International President Brian Bryant stated that Boeing’s latest proposal is under review, with the union prioritizing respect, fair pay, and progress on retirement security and other key issues.
Boeing’s Chief Financial Officer Brian West warned in a memo that the strike could significantly impact the company’s recovery, leading to cost-saving measures such as worker furloughs, cessation of all first- and business-class travel for workers including executives, pausing supplier shipments for some planes, and halting all noncustomer-related catering services at its offices.
Before the strike, Boeing faced substantial financial challenges. The Federal Aviation Administration (FAA) launched an investigation following a January 5 incident where an Alaska Airlines flight had to make an emergency landing due to a door plug blowing off a Boeing 737 Max 9 mid-flight. Additionally, a design flaw in the 737 Max led to fatal crashes in 2018 and 2019, resulting in a 20-month grounding of the jet and continued scrutiny on the company’s quality control.
In light of these systemic issues, FAA Administrator Mike Whitaker stated that Boeing needs to make significant changes to its quality system, emphasizing that he would use his full authority to ensure accountability from manufacturers, air carriers, and within the FAA itself. He intends to convey this commitment to Congress.
In a separate development, Boeing announced that Ted Colbert, president and CEO of its Defense, Space & Security unit, is departing the company. Steve Parker, the unit’s Chief Operating Officer, will take over Colbert’s responsibilities until a successor is appointed. Boeing’s Defense, Space & Security unit reported substantial financial losses in recent quarters, including a $913 million loss in the second quarter, up from $527 million the previous year, and an annual loss of $1.8 billion for 2023.
Jefferies analyst Sheila Kahyaoglu recently revised the investment firm’s price target on Boeing from $270 to $240, maintaining a buy rating. Kahyaoglu noted the unpredictability of the IAM strike but adjusted expectations based on a projected four-week duration, accounting for a likely slower 737 production ramp and ongoing defense pressures.
