Boeing strike could cost $3.5 billion if it lasts

The work stoppage will not immediately affect commercial flights, but could still result in significant losses for the company, which is based in Arlington, Va., but has its roots in the Seattle area, where it makes most of its planes for airlines. Boeing is already dealing with a tarnished reputation and financial struggles that have piled up in recent years.

Here’s what you need to know about the potential impact of the strike and what could happen next.

Will the strike affect airline flights?

The strike will not affect travel unless it lasts a very long time.

The strike halts production of the 737 Max, Boeing’s best-selling airliner, along with the 777, or “triple-seven,” and the 767 freighter at factories in Renton and Everett, Wash., near Seattle. It probably won’t affect Boeing 787 Dreamliners, which are built by non-union workers in South Carolina.

Airlines sometimes place orders for large numbers of aircraft, but when they do they are usually spread over several years. Therefore, the strike will not create a shortage of aircraft at any particular airline. Some carriers may have to fly some of their older planes longer because the Boeing planes they bought to replace them will be delayed.

However, Boeing will lose a lot of money, at least in the short term. Based on the length of previous 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 pullback could last until mid-November, when weekly payments of $150 of striking union workers the fund may seem low before the holidays.

Such a long strike would cost Boeing up to $3.5 billion in cash because the company receives about 60 percent 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 $100 million a day in deferred revenue.

What leverage do striking workers have?

They are skilled workers that Boeing cannot easily replace.

“Boeing has to keep making these (planes) because Boeing has been hemorrhaging money because of their safety issues,” said Art Wheaton, director of labor studies at Cornell University’s School of Industrial and Labor Relations. “And safety issues are often caused by understaffing.”

Wheaton said striking members of the International Association of Machinists and Aeronautical Workers have legitimate concerns about the rejected contract, which would have raised wages 25 percent over four years, well below the union’s original demand of 40 percent over three years.

“It’s been 10 years without him getting a big raise at all — he’s trying to make up for lost time,” Wheaton said. He pointed to the wider context of inflation and the rising cost of living. “There was a lot of bad blood” from other concessions workers had to make in their last deal, he added.

The union originally wanted to restore traditional pensions that were scrapped a decade ago. The demand was a key sticking point in early contract negotiations, but the union settled instead for an increase in contributions to employees’ 401(k) retirement accounts and a commitment that Boeing would build its next new plane in Washington.

AJ Jones, a quality inspector who has worked at Boeing for 10 years, said the raises and other terms of the proposed contract are insufficient.

“I’m glad we voted for the strike because we are leaders in the aerospace industry. And I think we deserve better,” Jones said Friday as he blew a whistle and held up a strike sign on a corner outside the Boeing Renton campus. “We’re fighting for a decent wage because, you know, you have Boeing bosses making millions in bonuses. And we want fair remuneration.”

What will Boeing do next?

Boeing has said it is ready to return to the negotiating table.

“The message was clear that the tentative agreement we reached with IAM management was not acceptable to 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 only became Boeing chief executive on Aug. 8, is already working on ways to address union members’ objections.

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 would have to come close to the union’s initial proposal for a 40 percent wage increase and possibly make other concessions.

Boeing has more at stake than just its finances. Wheaton said Boeing doesn’t want another blanket over its reputation.

Very little has gone right for Boeing this year, since a panel exploded and left a gaping hole in one of its passenger jets during an Alaska Airlines flight to NASA in January, leaving two astronauts in space, May rather sending them home in a troubled Boeing spaceship. .

The strike could also cause the company, which has lost more than $25 billion over the past six years, to fall further behind European rival Airbus in terms of orders and deliveries of new airliners.

“They don’t really need to have this war (also) if they can avoid it,” Wheaton said.