On Monday (Nov. 18), Boeing (BA) announced it will cut 2,500 jobs in Washington State, Oregon, South Carolina, and Missouri as part of a plan to cut 10 percent of its global workforce, affecting 17,000 jobs. Boeing shares rose 2.6 percent following the announcement and have gained more than 6 percent since Friday's close. The small disruption was a relief to Boeing executives who have seen the company's stock price drop 40 percent this year.
Boeing is in the midst of a financial and reputational crisis that could threaten the legacy of America's iconic company. “I wouldn't buy it [Boeing stock] at any price. The company is in deep trouble,” said Aswath Damodoran, a finance professor at New York University and a well-known valuation expert, on the Prof G Markets podcast recently. “I've never seen a company blow up its reputation as completely and utterly as Boeing has done in the last 20 years.”
The Seattle-headquartered aerospace and defense giant has been struggling with a decade of decline, which came to a head in January when a large panel exploded on a two-month-old 737 Max plane during takeoff. Although the pilot was able to land the plane safely, the incident revealed that Boeing was not properly controlled during production.
A subsequent six-week investigation led by the Federal Aviation Administration (FAA) revealed several instances in which Boeing failed to meet manufacturing quality control standards. In May, the FAA implemented a corrective action plan that requires the company to submit a comprehensive proposal detailing completed and ongoing measures to improve safety, streamline operations, improve supplier oversight, and strengthen employee training and internal audits. Boeing's work to comply with this plan is ongoing.
Even before the January incident, Boeing's public image was hanging by a thread. Two crashes involving Max 8 planes in 2018 and 2019 killed 346 people, prompting a nearly 20-month flight suspension. In 2019, a New York Times investigation of hundreds of pages of internal Boeing emails suggested the company was once again prioritizing speed over safety to stay competitive with rival Airbus. “I told my wife that I never planned to fly [Boeing planes],” Joseph Clayton, a Boeing expert, told the Times in 2019.
A second New York Times investigation, published in May, suggested that Boeing continued to ignore safety red flags, citing anonymous employees who said a culture of high-speed acceleration had been going on for years and had worsened despite the loss of 346 lives at Boeing's expense. aircraft malfunction.
Boeing and Airbus together have 100 percent of the global commercial aircraft market. But Boeing executives are facing growing pressure from investors to catch up with Airbus, which holds about 60 percent of the market. As of 2019, Airbus has delivered 3,800 planes, while Boeing has delivered only 2,100.
New CEO replacement plan
Boeing's new CEO, Kelly Ortberg, who took office in August, is trying to clean up an impossible mess. His first challenge was to negotiate with the trade unions to end the seven-week strike. The strike halted nearly all Boeing production at the company's key facility, further digging the company's financial grave.
In October, Boeing sold shares to raise $21 billion, which Ortberg said will be used to maintain the company's balance sheet. Ortberg is reportedly considering selling the space unit to Boeing—a major NASA contractor that has played a key role in building and maintaining the International Space Station.
Despite these warning signs, many investment banks gave Boeing a consensus “buy” rating, indicating they believe the company will be able to bounce back. The most bullish, UBS, has a Boeing stock price of $315, more than double its current price of $148.
There are some signs of the company's resilience: Boeing brought in $17.84 billion in revenue during the July-September quarter, a slight dip of 1.5 percent from the same period last year. The company's annual revenue grew slightly: in 2023, it pulled in 77.80 billion dollars, which is an increase of 16.8 percent from the previous year.
And, despite its reputational disaster, Boeing continues to receive new orders. Earlier this month, Avia Solutions Group, a global aviation, personnel, maintenance, insurance (ACMI) company, ordered 40 new 737-8 models with the potential to order 40 more in the future.
