A strike by some 33,000 Boeing machinists has halted production of the American aerospace giant's best-selling airplanes. The workers began picketing at Boeing factories and plants in Washington, Oregon and California on Friday after rejecting a contract offer their union negotiated and endorsed.
The work stoppage will not immediately impact commercial flights but could still bring significant losses for the company, which is headquartered in Arlington, Virginia, but has its roots in the Seattle area, where it makes most of its planes for airlines. Boeing is already dealing with a battered reputation and financial struggles that have piled up over recent years.
Here's what to know about the potential impact of the strike and what might happen next.
Will the strike affect airline flights?
The strike won't affect travelers unless it lasts a very long time.
The strike stops production of the 737 Max, Boeing's best-selling airliner, along with the 777 or “triple-seven” jet and the 767 cargo plane at factories in Renton and Everett, Washington, near Seattle. It will probably not affect Boeing 787 Dreamliners, which are built by non-union workers in South Carolina.
Airlines sometimes place orders for large numbers of planes, but when they do the deliveries are usually spread over several years. The strike therefore isn't likely to create a plane shortage at any particular airline. Some carriers might have to keep flying some of their older planes longer because the Boeing jets they bought to replace them will be delayed.
However, Boeing stands to lose a lot of cash, at least in the short term. Based on the length of past Boeing strikes — the last two were in 1995 and 2008 — TD Cowen aerospace analyst Cai von Rumohr says it's realistic to think the current walkout could last into mid-November, when workers' USD 150 weekly payments from the union's strike fund might seem low going into the holidays.
A strike that long would cost Boeing up to USD 3.5 billion in cash flow, as the company gets about 60 per cent of the sale price when it delivers a plane to the buyer, von Rumohr added. The eight-week strike in 2008 cost the company about USD 100 million daily in deferred revenue.
What leverage do the striking workers have? They are skilled workers that Boeing can't readily replace.
“Boeing needs to keep making these (planes) because Boeing has been hemorrhaging money because of their safety problems,” said Art Wheaton, director of labor studies at Cornell University's School of Industrial and Labor Relations. “And safety problems are quite often caused by understaffing.”
Wheaton said the striking members of the International Association of Machinists and Aerospace Workers had legitimate concerns about the rejected contract, which would have raised pay 25 per cent over four years, far below the union's initial demand for 40 per cent over three years.
"They went 10 years without getting much of a raise at all — they are trying to make up for lost time," Wheaton said. He pointed to the wider backdrop of inflation and rising costs of living.
"There was a lot of bad blood” from other concessions workers had to make in their last agreement, he added.
The union initially wanted to restore traditional pensions that were eliminated a decade ago. The demand was a key sticking point in early contract negotiations, but the union instead settled for an increase in contributions to employee's 401(k) retirement accounts and a pledge that Boeing would build its next new aircraft in Washington.
"This is about respect, this is about the past, and this is about fighting for our future," IAM District 751 President Jon Holden said in announcing Thursday night's vote. The national union issued a statement of support, saying that negotiating teams would soon “regroup and begin planning the next steps” to secure an agreement that meets members' needs.
What will Boeing do next?
Boeing has said it's ready to get back to the bargaining table.
“The message was clear that the tentative agreement we reached with IAM leadership was not acceptable to the members," the company said in a statement, adding that it was “committed to resetting our relationship with our employees and the union.”
Chief Financial Officer Brian West said Friday that CEO Kelly Ortberg, who became Boeing's chief executive only on Aug. 8, was already working on ways to address the objections of the union members.
Experts say it will come down to how much Boeing is willing to open its wallet. Bank of America analyst Ronald Epstein said Friday that Boeing will have to move closer to the union's initial proposal of 40 per cent wage increases and possibly make other concessions.
Boeing has more at stake than just its finances. Wheaton said Boeing doesn't want another dent in its reputation.
Very little has gone right for Boeing this year, from a panel blowing out and leaving a gaping hole in one of its passenger jets during a January Alaska Airlines flight to NASA leaving two astronauts in space rather sending them home on a problem-plagued Boeing spacecraft.
The strike could also cause the company, which has lost more than USD 25 billion in the last six years, to fall farther behind European rival Airbus in orders and deliveries of new jetliners.
"They don't really need to have this war (too), if they can avoid it," Wheaton said.