Boeing reported a whopping $6.2 billion quarterly loss Wednesday as a nearly six-week labor strike weighed on its commercial plane division and costly problems dragged down its defense and space business.
The embattled aviation giant, which has been under scrutiny from regulators following safety problems, reported a one percent decline in revenues to $17.8 billion.
The results had been telegraphed to the market on October 11, when newly installed Chief Executive Kelly Ortberg announced the company was cutting 10 percent of its workforce.
Ortberg, in a message to employees, said a turnaround would require a “fundamental culture change” as well as steps to stabilize finances, improve operations and devise a future vision for the company.
“It will take time to return Boeing to its former legacy, but with the right focus and culture, we can be an iconic company and aerospace leader once again,” Ortberg said in a news release.
Even before the strike, Boeing had slowed production in its commercial plane division to ensure greater attention to safety protocols after a 737 MAX flown by Alaska Airlines was forced to make an emergency landing in January when a fuselage panel blew out mid-flight.
The near-catastrophe — coming after two fatal 737 MAX crashes in 2018 and 2019 that claimed 346 lives — put Boeing under greater regulatory oversight.
The company’s latest results were dented by $3 billion in one-time cost hits to its 777X and 767 programs, as well as the drag from the ongoing strike by the International Association of Machinists and Aerospace Workers (IAM).
About 33,000 IAM workers in the US Pacific Northwest walked off the job on September 13. The union is slated to vote on a new contract that could end the stoppage later Wednesday.
In its defense and space business, Boeing’s results were battered by $2 billion in costs for a number of programs, including the KC-46A Pegasus Air Force refueling aircraft that has featured as a problem in prior quarters.
Ortberg was scheduled to face Wall Street analysts later Wednesday in his first conference call since joining the company in early August.
– Long road ahead –
Ortberg’s mission is to “turn this big ship in the right direction and restore Boeing to the leadership position that we all know and want,” he said in the memo to staff.
He spotlighted an end to the IAM strike as a priority, saying, “we have been feverishly working to find a solution that works for the company and meets our employees’ needs.”
But once the strike ends, the company must follow improved safety protocols to ramp up operations.
Ortberg called for better management of defense, where the company has seen profits repeatedly hit in recent years due to cost-overruns on fixed-price contracts. In September, Boeing defense chief Ted Colbert left the company.
Other key priorities include maintaining Boeing’s investment-grade credit rating and, further down the road, beginning to engineer a new airplane.
“But we have a lot of work to do before then,” he added.
“Boeing was once a benchmark for what good culture looks like,” Ortberg said. “And I believe we can return to that legacy.”
Analyst Peter McNally of Third Bridge predicted Boeing’s recovery would not be swift.
“Even if the strike is settled today, Third Bridge experts believe the impact on Boeing will carry through beyond the fourth quarter,” McNally wrote, saying it will take a week to get workers back in place and “at least” another three weeks to return to normal productivity.
Between that and other problems with operations and the Boeing supply chain, “Third Bridge experts see an underwhelming recovery in Boeing deliveries for years to come.”
Shares fell 1.0 percent in pre-market trading.
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