Boeing Faces Turbulent Skies: Extensive Employee Furloughs Amid Labor Strike

Boeing has announced temporary furloughs impacting tens of thousands of employees due to a machinists' strike halting production. The strike, Boeing's first since 2008, could cost billions and affect its credit rating. Talks between Boeing and the union continue amidst significant financial strain and operational disruptions.

Boeing announced on Wednesday that it will temporarily furlough tens of thousands of employees following a machinists' strike that began on Friday, halting production of the 737 MAX and other aircraft. CEO Kelly Ortberg informed employees via email that select employees will take one week of furlough every four weeks during the strike.

Ortberg also stated that he and other leaders at Boeing will accept pay reductions for the duration of the strike. The extensive furloughs suggest Ortberg is bracing for a potentially prolonged labor battle amid mounting frustration among workers.

This strike, Boeing's first since 2008, compounds an already difficult year for the company, beginning with a 737 MAX mishap in January. Analysts warn that a prolonged strike could cost Boeing billions, further straining its finances and threatening its credit rating.

Ben Tsocanos, aerospace director at S&P Global Ratings, noted that the cost-saving measures are unlikely to fully mitigate the financial impact of the strike. Boeing and the International Association of Machinists and Aerospace Workers are resuming talks with federal mediators, though initial mediation efforts have been unproductive.

The union is demanding a 40% raise over four years, significantly higher than Boeing's offer of 25%, which was rejected by workers. Ortberg emphasized that Boeing would prioritize critical activities such as safety, quality, and customer support during the strike period.

Boeing employs approximately 150,000 people in the U.S., and the exact number of employees affected by the furloughs remains unclear. However, unionized Boeing engineers appear to be exempt. The strike also poses risks for Boeing's supplier network, with some suppliers considering similar furlough measures.

Production has ceased for Boeing's popular 737 MAX jets, as well as its 777 and 767 widebody aircraft, causing delays in deliveries. The company has frozen hiring and halted most parts orders, impacting suppliers.

One senior supplier criticized Boeing's response as indicative of financial panic, suggesting a settlement would be more prudent given the company's precarious financial position.

Boeing shares have decreased by approximately 40% this year, reflecting the challenges faced by the aerospace giant.

(With inputs from agencies.)