Beleagured aircraft manufacturer Boeing will slash approximately 10% of its total workforce over the coming months and further delay the launch of its 777X widebody aircraft as a continuing strike by factory workers in Portland and Seattle weighs on its finances.
In a memo to employees on Friday afternoon, CEO Kelly Ortbeg said it was “hard to overstate the challenges we face together” as he laid out plans to dramatically cut costs across the company.
“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,” Ortberg told workers.
Ortberg said the planned redundancies would include executives and managers, as well as employees.
Boeing has warned of financial difficulties ever since tens of thousands of factory workers in Puget Sound went on strike after overwhelmingly rejecting a tentative agreement that included a bumper pay raise and other benefits.
Earlier this week, Boeing withdrew its non-negotiated “best and final” offer, which included a pay rise of 30%, a ratification bonus of $6,000, and improvements to 401(k) plans, after federally mediated negotiations broke down without agreement.
Boeing’s CEO and president of the Commercial Airplanes division, Stephanie Pope, blamed the IAM District 751 union for the failed negotiations, saying its demands were “far in excess” of what the company could afford to remain competitive.
The factory workers, who are officially known as machinists, build some of Boeing’s most successful aircraft, including the best-selling 737MAX. Aircraft assembly lines have, however, fallen silent for more than four weeks as the strike drags on.
Boeing had already initiated emergency cost-cutting measures in response to the strike, which included banning employees, including executives, from flying in Business Class for work trips.
Many U.S.-based employees had also been warned that they would be temporarily furloughed as the strike dragged on. In response to the plan to lay off thousands of workers, Boeing said the next round of furloughs would be called off.
“As we move through this process, we will maintain our steadfast focus on safety, quality and delivering for our customers,” Ortberg said in his memo.
“We know these decisions will cause difficulty for you, your families and our team, and I sincerely wish we could avoid taking them. However, the state of our business and our future recovery require tough actions.”
In addition to the mass layoffs, Boeing said it had decided to further delay its 777X widebody project. Airlines, including Emirates, British Airways, and Qatar Airways, have already been waiting years for the much-delayed aircraft, but Boeing has now informed them that they shouldn’t expect to start receiving deliveries of the next-generation airplane until 2026 at the earliest.
Launch customers of the 777X have been desperate to acquire the aircraft to replace aging, less sustainable aircraft and grow capacity following the pandemic.
On Tuesday, union officials said Boeing’s decision to publish a non-negotiated offer “made it harder to reach an agreement” and that the aircraft manufacturer had been ”unwilling to move in our direction” during federally mediated talks.
