1 week Ago By Rytis Beresneviius
Boeing has begun handing out layoff notices to its employees, aiming to cut around 10% of its workforce as its chief executive outlined a vision of becoming a more streamlined organization. Aligning with its financial reality In a statement to Simple Flying, a Boeing spokesperson affirmed that the company has begun handing out layoff notices to its employees to adjust its workforce levels with its financial reality and a more focused set of priorities. “We are committed to ensuring our employees have support during this challenging time.
” The representative reiterated that most employees who have received the news that they are being let go will exit the company in mid-January 2025. If eligible, the to-be-former employees of the original equipment manufacturer (OEM) will receive severance pay, career transition services, and subsidized health care benefits up to 3 after leaving Boeing. Boeing’s spokesperson noted that reductions include attrition and concentrating backfills for open positions on business-critical priorities.
The money will provide a much-needed lifeline for the supplier. Building the future Boeing Kelly Ortberg, the president and chief executive officer (CEO) of Boeing, outlined those priorities in his opening remarks before the manufacturer’s Q3 earnings call on October 23. The CEO outlined four key priorities: a cultural change at the company, stabilizing the business, improving execution discipline, and building a new future for Boeing.
The latter priority was underpinned by a workforce reduction, with Boeing letting go up to 10% of around 170,000-strong workforce. According to the company’s 2023 financial report, it had around 171,000 employees as of December 31, 2023, compared to 156,000 at the end of 2022. “Boeing is an airplane company and at the right time in the future we need to develop a new airplane.
But we have a lot of work to do before then.” This includes stabilizing the company, streamlining the portfolio, and restoring the balance sheet so that Boeing has a clear path toward the next commercial aircraft, according to Ortberg. “We need to reset priorities and create a leaner, more focused organization.
We’ve recently announced a workforce reduction which will focus on consolidation of areas where we’re not efficient and we need to continue to focus on reducing non-essential activity.” During the earnings call, Ortberg admitted that Boeing was inefficient, with many employees complaining about too much overhead, which slows down processes at the OEM. “And I wouldn't think of it, like we're going to take people off the production or out of the engineering labs.
That's not our intent here. It's about – around getting ourselves more efficient and have a more lean and mean machine going forward.” Kelly Ortberg will make his debut on Boeing's earnings call later today.
Cash struggles Whatever the intent may be, a new Boeing aircraft is not a realistic possibility in the short-term future. Creating a new, clean-sheet design will take billions of investments, billions, which, at the moment, the aircraft manufacturer does not have. During the same Q3 earnings call, Brian West, the chief financial officer (CFO) and executive vice president of finance of Boeing, detailed that the company expected to use cash in 2025 with a significant improvement compared to 2024.
The executive highlighted Boeing’s focus on building momentum as its commercial aircraft division begins restoring production rates and, following the Federal Aviation Administration’s ( FAA ) approval, producing more than 38 737 MAX aircraft per month, which should result in a return to Boeing being a cash-generating business. Presumably, some cash could be raised if Boeing decides to shed off its various side businesses across its portfolio, with Ortberg reiterating that the OEM needs to focus on areas where it excels. “[.
..] as I look at the portfolio and I've made this comment, I think that we're better off being – doing less and doing it better than doing more and not doing it well.
So, we're in the process of taking an evaluation of the portfolio.” Returning to being cash-positive will help the company deal with its ballooning total (short and long-term) debt, which increased to $57.7 billion as of September 30.
According to Boeing’s 2023 financial report, in 2026, debt and other notes’ scheduled principal payments will balloon to $7.9 billion, compared to the planned $4.5 billion payments in 2025.
In his opening remarks, Ortberg admitted that Boeing “was saddled with too much debt.” Once again, the CEO outlined that restoring the balance sheet to best support its investment grade rating was just one of the turns on Boeing’s path to its next commercial aircraft. Two out of three major credit rating agencies said that they were reviewing whether to downgrade Boeing's rating to junk.
Next aircraft Nevertheless, Boeing’s next aircraft could come at a time when Ortberg could no longer serve as its CEO. The executive, aged 64, could potentially stay at the company for as long as six years due to Boeing’s mandatory retirement age of 70. While there is a lot of fog surrounding Boeing’s next commercial program, one thing was clear: it will be built in the larger Seattle area, with the International Association of Machinists and Aerospace Workers (IAM) District Lodge 751 and District W24, the two labor unions that went on a 52-day strike that ended on November 4 , approving a contract, which among other benefits, secured that clause.
Possibly named the 797 since there are no other single-digit numbers that could squeeze in between the two 7s and follow Boeing’s conventional naming model , the name was previously associated with the spiritual successor of the 757, the New Midsize Airplane ( NMA ). However, that project has stalled, at least under the old leadership. During the company’s 2022 investor day, David Calhoun, the former president and CEO of Boeing , said that the OEM could introduce new aircraft “sometime in the middle of next decade.
” Stan Deal, the former president and CEO of Boeing Commercial Airplanes (BCA), added that a new aircraft would have to be at least 20% better than the current-generation – A320neo and 737 MAX, for example – products. “There is nothing proven in the propulsion side of the house, nothing that's going to deliver that in this decade. [.
..].
My guess is when they do it, it'll be somewhere around the 10% at the high end, probably something south of that.” Whether that point of view has changed with Ortberg at the helm of the company remains to be seen. But before BCA can move on to the projects of the future, it still has more than a few problems to handle before it can truly focus on the next aircraft program.
This includes short-term issues such as restarting production in Washington, ramping up beyond the 38/per month rate for the 737 MAX (with the FAA’s approval), the certification of the 737 MAX 7 and MAX 10, entry-into-service (EIS) of the 777X family , and the well-being of its supply chain, which not only has been struggling since the end of the pandemic but has also been reeling after the 52-day strike by Boeing’s machinists. While all striking machinists returned to Boeing's facilities on November 12, the company is now facing a bumpy road to restart production..
