On Thursday, September 12, workers at the American aircraft manufacturer Boeing voted to go on strike starting from Friday. This decision comes as another blow to Boeing, which has been facing challenges to its reputation and financial situation, and now risks halting production of its best-selling aircraft.
According to the Associated Press, the International Association of Machinists and Aerospace Workers (IAM) reported that 94.6% of workers at the West Coast facilities rejected the union’s contract with Boeing that included a 25% pay raise over four years. 33,000 workers have decided to strike starting from the early hours of September 13.
Boeing responded by stating that they are prepared to reach a new agreement through negotiations. “Apparently, the preliminary agreement we reached with IAM leadership was not accepted by the members. We remain committed to rebuilding relationships with our employees and the union,” Boeing said in a statement.
If the strike continues, Boeing will be unable to deliver new aircraft, thus compromising its much-needed cash flow. This presents a new challenge for CEO Kelly Ortberg, who took office just six weeks ago.
Over the past six years, Boeing has incurred losses exceeding $25 billion and has fallen behind its European competitor, Airbus S.A.S.
On Wednesday, Ortberg told Boeing employees that the strike “benefits no one” and will hinder Boeing’s recovery, deepening concerns among airline customers about the company.
“For Boeing, our business is going through a difficult period, partly due to our own mistakes in the past,” Ortberg said. “As long as we work together, we can get back on track.”
Jon Holden, president of IAM District 751, pointed out that Ortberg is in a difficult position as workers are dissatisfied with stagnant wages, including concessions made in pension and healthcare since 2008 to prevent the company from relocating jobs elsewhere.
Holden stated that the union will further understand the members’ demands to determine which issues to emphasize in future negotiations.
Boeing mentioned that the average annual income of its employees is $75,608, excluding overtime pay. After the four-year contract term, the income is expected to increase to $106,350.
However, the agreement failed to meet the union’s initial demand for a 40% pay raise. The union also hoped to reinstate the traditional pension that was canceled ten years ago, but ultimately agreed for Boeing to pay employees an additional $401,000 through retirement accounts.
Boeing promised that if employees accept the contract, the company will build the next new aircraft in the Puget Sound area in Seattle’s West Coast.
Boeing believes this will bring significant benefits to employees.
The new aircraft is expected to enter service before the mid-2030s, replacing the 737 Max. This is seen as a crucial victory for the union leadership, aiming to avoid a repeat of Boeing relocating Dreamliners’ production line from the Seattle area to South Carolina.
The strike will result in production halts at Boeing’s factories in Renton and Everett in Washington State, affecting deliveries of its best-selling 737 Max, 777 jetliners, and 767 freighters.
However, the Boeing 787 Dreamliner may not be affected as it is produced by non-union workers in South Carolina.
TD Cowen aviation analyst Cai von Rumohr predicted that based on Boeing’s history of strikes — the most recent occurred in 1995 and 2008 — this strike is expected to last until mid-November.
During the strike, the union will pay workers $150 per week from the strike fund, but this amount seems inadequate to cover their expenses during the strike.
Von Rumohr stated that such a prolonged strike could cost Boeing up to $3.5 billion in cash flow as the company can only realize around 60% of the sale price when delivering aircraft to buyers.
Holden informed members on Monday, September 9, that the union had fought for all conditions attainable through negotiations and recommended members to accept the agreement, “because we cannot guarantee greater results during the strike.”
However, many rank-and-file employees are still upset about the concessions made in pensions, healthcare, and salaries.
“They (workers) are frustrated, they have a lot of demands. I think Boeing understands this and hopes to meet a significant portion of them,” von Rumohr said. “The question is, will they (the company) do enough?”
The strike marks the latest setback for Boeing. Since the crashes of two 737 Max planes in 2018 and 2019 that resulted in 346 fatalities, Boeing’s reputation has been severely damaged.
In January this year, shortly after takeoff, a door panel on a Boeing 737 MAX aircraft came loose, once again raising questions about the safety of its products.