Boeing prepares layoff notices for thousands of workers as turmoil deepens

By Allison Lampert, David Shepardson and Tim Hepher

(Reuters) -Thousands of Boeing staff will get layoff notices within weeks, a union and industry sources said, as a senior U.S. official flew to Seattle to try to ease a crippling strike and a major airline issued a warning over the planemaker’s deepening turmoil.

Acting U.S. Labor Secretary Julie Su’s first in-person intervention comes days after Boeing unveiled plans to cut 17,000 jobs and take $5 billion in charges, continuing a year of tumult for the company.

“Acting Secretary Su is meeting with both parties today to assess the situation and encourage both parties to move forward in the bargaining process,” a Department of Labor spokesperson said on Monday.

While Su has previously spoken with Boeing and the striking West Coast factory workers’ union, it is her first time in Seattle meeting both sides in person.

The International Association of Machinists and Aerospace Workers (IAM) said its lead negotiator, Jon Holden, had updated Su on the current talks, “stressing the Union’s commitment to a negotiated contract that values our members’ skills and dedication.”

Boeing and a White House spokesperson declined to comment on Su’s visit.

Roughly 33,000 workers have been on strike since Sept. 13, seeking a 40% wage increase over four years.

Boeing will next month send out 60-day notices to thousands of workers including many in its commercial aviation division, meaning those staff will leave the company in mid-January, one source familiar with the matter said.

A second phase of notices, if needed, could be rolled out in December, the source said.

A spokesperson for the Society of Professional Engineering Employees in Aerospace, which represents Boeing engineers, said the company informed the union on Monday that 60-day notices to its members would be issued on Nov. 15.

A Boeing spokesperson said the company had shared information with managers including plans for 10% reductions at its commercial unit involving both union and non-union workers. The spokesperson added that the striking IAM employees were not currently affected.

Brian Bryant, the IAM’s international president, called the job cut plan “corporate greed at its worst”.

“Boeing just turned its back on 17,000 of its own workers – the same people who carried Boeing through crisis after crisis, year after year,” he said in a statement.

Shares of the aerospace giant fell 1.3% to close at $148.99 on Monday, following the company’s surprise after-hours job cut announcement on Friday, which also included a new delay to the 777X jetliner and the ending of civil 767 freighter production.

Boeing will refrain from asking for voluntary departures to limit severance cash and avoid an exodus of skills, sources said, adding the company will rely solely on involuntary layoffs. Rivals are scooping up scarce labor to relieve pressure on aerospace supply chains.

“The trick will be not losing the 10% of people you want to keep, which is even more important than usual in the post pandemic skill shortage environment,” said Agency Partners analyst Nick Cunningham.

Boeing has been hiring workers to prepare for higher production rates that have not materialized as output was capped by regulators following the blow-out of a door plug on an Alaska Airlines jet in January.

INDUSTRY ALARM

The one-year delay in 777X deliveries to 2026 was widely expected in the industry and brings the lag in delivery of the 777 mini-jumbo successor to six years amid certification and testing delays.

Emirates Airline President Tim Clark, whose initial order for 150 jets helped launch the world’s largest twin-engined jet more than a decade ago, hinted at commercial repercussions.

“We will be having a serious conversation with them over the next couple of months,” he said in a statement. “I fail to see how Boeing can make any meaningful forecasts of delivery dates.”

He also became the first senior industry figure to articulate fears, whispered privately by some industry leaders in recent weeks, over Boeing’s ability to tackle its worst-ever crisis intact.

“Unless the company is able to raise funds through a rights issue, I see an imminent investment downgrade with Chapter 11 looming on the horizon,” Clark told the Air Current, an aviation industry publication.

Emirates is the largest user of the 777 jet family, a long-distance workhorse whose original success has been clouded by delays to its successor and the crisis engulfing Boeing’s smaller 737 cash cow over safety and quality issues.

Friday’s package of announcements showed Boeing has just over $10 billion of gross cash, a much-touted level that analysts said would ease some near-term pressure, while warning the company still needed to raise money by year-end.

Most analysts expect Boeing to raise up to $15 billion through a share issue. But the perception of major airlines to Boeing’s financial risk remains a sensitive topic as many have billions of dollars of deposits sitting with the planemaker – an exposure some already want to limit because of delays, industry sources say.

Boeing declined to comment on Clark’s remarks.

Ratings agency S&P has warned Boeing risks losing its prized investment-grade credit rating.

(Reporting by Allison Lampert in Montreal, David Shepardson in Washington, Joe Brock in Seattle, Tim Hepher in Paris and Chandni Shah in Bengaluru; Additional reporting by Abhijith Ganapavaram and Surbhi Misra in Bengaluru and Mike Stone in Washington; Editing by Lisa Shumaker, Matthew Lewis and Jamie Freed)