Boeing (BA, Financial) is experiencing a 2% drop in trading after announcing a 10% workforce reduction, equating to 17,000 jobs. The aerospace leader also delayed the first 777X deliveries and projected Q3 revenue of around $17.8 billion, which falls short of analyst expectations. Recently appointed CEO Robert "Kelly" Ortberg is quickly addressing these challenges since assuming his role on August 8.
- Boeing cited development challenges, flight test pauses, and work stoppages as reasons for the 777X program delay. The 777-9 is now expected in 2026 and the 777-8 freighter in 2028, resulting in a $2.6 billion pre-tax earnings charge. This reflects Boeing's updated certification timelines and anticipated delays linked to the machinist union (IAM) work stoppage.
- The Commercial Airplanes segment will end production of the 767 freighter, incurring a $400 million pre-tax charge due to the IAM work stoppage. Boeing plans to fulfill remaining 767 Freighter orders before concluding the program in 2027, while KC-46A Tanker production will continue.
- Boeing's Defense segment also requires improvement, particularly in fixed-price development programs. The company anticipates significant new losses in Q3 due to commercial derivatives work stoppage, ongoing program challenges, and the decision to complete 767 freighter production.
- CEO Ortberg acknowledged Boeing's difficult position, emphasizing the need for structural changes to remain competitive. The focus will be on core areas to avoid underperformance and underinvestment.
Boeing has faced challenging years with safety issues and production delays. Investors, however, see potential in CEO Ortberg's leadership to drive significant changes. His strong reputation in the aerospace industry brings hope for a turnaround. Additionally, the job cuts may encourage the union to end the work stoppage and reach an agreement.
