Washington:

Boeing’s first strike in 16 years could further compound global shortages of jetliners that have been pushing up airfares and forcing airlines to keep older jets flying longer, industry executives and analysts said.

The US planemaker’s West Coast workers went on strike at midnight on Friday after overwhelmingly rejecting a contract deal, halting production of Boeing’s workhorse 737 MAX.

It is Boeing’s first strike since 2008, and Boeing Chief Financial Officer Brian West warned a prolonged walkout could hurt output and “jeopardize our recovery”.

“Boeing is a systemically important company for global aviation,” Ross O’Connor, chief financial officer of Irish leasing company Avolon, told Reuters on Friday.

A strike “could have an impact on production levels, which could exacerbate some of the supply shortages that are in the market at the moment for sure,” he said after Avolon announced it had acquired a large portfolio of jets from Castlelake.

Airlines have struggled to expand capacity to meet rising demand as supplies of jetliners are curtailed by parts shortages, industry-wide recruitment problems and overloaded maintenance shops.

Analysts have been warning the most promising part of the industry’s all-important business cycle could run out before airlines have a chance to enjoy the full benefits of demand.

“It’s going to be a significant amount of time before we see that balance. I’m starting to evolve the hypothesis that it won’t be (extra) supply that corrects it, but instead a softening of demand,” said Rob Morris, global head of consultancy at Cirium Ascend.

Some say high air fares – although good for airlines in the short term – could themselves accelerate that tipping point.

“My view is that (average fares) will rise; and when ticket prices go up, then all other things being equal, you have lower traffic levels,” said aviation economist Adam Pilarski, senior vice-president at AVITAS consultancy.

As Boeing halts production of its most-sold jet, European rival Airbus is also struggling to meet its goals.

Airbus Chief Executive Guillaume Faury expressed optimism at a U.S. Chamber of Commerce conference this week that the European planemaker would meet a recently lowered target of 770 deliveries this year, following a profit warning and engine supply glitch in the summer.

But following a short-lived spike in deliveries in July, industry sources questioned how comfortably the world’s largest planemaker would exceed last year’s 735.

Dwindling numbers of planes in storage and record-high utilization of existing planes confirm the supply squeeze.

FLEET AGE RISING

For now, Boeing’s lower production levels compared to Airbus may limit the incremental effect of the strike. Yet analysts said airlines have little room to maneuver.

With leasing companies also running out of available capacity, carriers need to keep existing jets flying longer.

For most of the past 15 years, the average age of the fleet declined as airlines and leasing companies took advantage of low interest rates to invest in new fuel-saving jets.

In 2010, the average age of the widely flown single-aisle jet fleet was about 10.2 years, according to Cirium data.

After dipping to 9.1 years during the pandemic as airlines grounded fleets, the age started growing again. It now stands at 11.3 years “and still heading upwards,” Morris said.

That is despite efforts to reach net zero emissions by 2050, which rely partly on modernizing the planes in service.

“It must mean that we’re burning more CO2 than we should be because we’re using more old aircraft…so one of the things that can go wrong is sustainability,” Morris said.

The airline industry says it is confident of reaching a target of net zero emissions by 2050.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Aircraft assembly workers walked off the job early Friday (September 13, 2024) at Boeing factories near Seattle and elsewhere after union members voted overwhelmingly to go on strike and reject a tentative contract that would have increased wages by 25% over four years.

The strike started at 12.01 a.m. Pacific Daylight Time (PDT), less than three hours after the local branch of the International Association of Machinists and Aerospace Workers announced 94.6% of voting workers rejected the proposed contract and 96% approved the work stoppage, easily surpassing a two-thirds requirement.

Boeing says it has a deal to avoid a strike by more than 30,000 machinists

The labour action involves 33,000 Boeing machinists, most of them in Washington state, and is expected to shut down production of the company’s best-selling airline planes. The strike will not affect commercial flights but represents another setback for the aerospace giant, whose reputation and finances have been battered by manufacturing problems and multiple federal investigations this year.

The striking machinists assemble 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. The walkout likely will not stop production of Boeing 787 Dreamliners, which are built by nonunion workers in South Carolina.

Outside the Renton factory, people stood with signs reading, “Historic contract my ass” and “Have you seen the damn housing prices?” Car horns honked and a boom box played songs such as Twisted Sister’s “We’re Not Gonna Take It” and Taylor Swift’s “Look What You Made Me Do.”

“The machinists make $75,608 per year on average, not counting overtime, and that would rise to $1,06,350 at the end of the four-year contract,” according to Boeing.

However, the deal fell short of the union’s initial demand for pay raises of 40% over three years. The union also wanted to restore traditional pensions that were axed a decade ago but settled for an increase in new Boeing contributions of up to $4,160 per worker to employee 401(k) retirement accounts.

Under the rejected contract, workers would have received $3,000 lump sum payments and a reduced share of health care costs. Boeing also had met a key union demand by agreeing to build its next new plane in Washington state.

Several workers said they considered the wage offer inadequate and were upset by a recent company decision to change the criteria on which annual bonuses are paid. Toolmaker John Olson (45) said he has received a 2% raise during his six years at Boeing.

“The last contract we negotiated was 16 years ago and the company is basing the wage increases off of wages from 16 years ago,” Mr. Olson said. “They don’t even keep up with the cost of inflation that is currently happening right now.” Boeing responded to the strike announcement by saying it was “ready to get back to the table to reach a new agreement”.

“The message was clear that the tentative agreement we reached with IAM leadership was not acceptable to the members. We remain committed to resetting our relationship with our employees and the union,” the company said in a statement.

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 in January to NASA leaving two astronauts in space rather sending them home on a problem-plagued Boeing spacecraft.

As long as the strike lasts, it will deprive the company of much-needed cash it gets from delivering new planes to airlines. That will be another challenge for new Boeing CEO Kelly Ortberg, who six weeks ago was given the job of turning around a company that has lost more than $25 billion in the last six years and fallen behind European rival Airbus.

Mr. Ortberg made a last-ditch effort to salvage a deal that had unanimous backing from the union’s negotiators. He told machinists on Wednesday (September 11, 2024) that “no one wins” in a walkout and a strike would put Boeing’s recovery in jeopardy and raise more doubt about the company in the eyes of its airline customers.

“For Boeing, it is no secret that our business is in a difficult period, in part due to our own mistakes in the past,” he said. “Working together, I know that we can get back on track, but a strike would put our shared recovery in jeopardy, further eroding trust with our customers and hurting our ability to determine our future together.”

The head of the union local, IAM District 751 President Jon Holden, said Mr. Ortberg faced a difficult position because machinists were bitter about stagnant wages and concessions they have made since 2008 on pensions and health care to prevent the company from moving jobs elsewhere.

“This is about respect, this is about the past, and this is about fighting for our future,” Mr. Holden said in announcing the strike.

The vote also was a rebuke to Mr. Holden and union negotiators, who recommended workers approve the contract offer. Mr. Holden, who had predicted workers would vote to strike, said the union would survey members to decide which issues they want to stress when negotiations resume.

Depending on how long the strike lasts, suspension of airplane production could prove costly for the beleaguered Boeing. An eight-week strike in 2008, the longest at Boeing since a 10-week walkout in 1995, cost the company about $100 million daily in deferred revenue.

Before the tentative agreement was announced on Sunday, Jefferies aerospace analyst Sheila Kahyaoglu estimated a strike would cost the company about $3 billion based on the 2008 strike plus inflation and current airplane-production rates.

Solomon Hammond (33), another Renton toolmaker, said he was prepared to strike indefinitely to secure a better contract.

Boeing’s offer “just doesn’t line up with the current climate. The wages are just too low,” Mr. Hammond said. “I make $47 an hour and work paycheck to paycheck. Everything costs more.”