Boeing shares are sliding as the company plans to cut 17,000 jobs and delay aircraft deliveries due to labor strikes

Boeing (BA) shares fell 2% in after-hours trading on Friday as the company said it would cut its workforce by 10%, or about 17,000 jobs, and suspend the first delivery of its 777X jet due to an ongoing labor strike will be postponed to 2026.

“Our company is in a difficult situation and the challenges we face together are difficult to overstate,” CEO Kelly Ortberg said in a message to employees posted on Boeing’s website. “Beyond managing our current environment, recovering our business requires difficult decisions and we must make structural changes to ensure we remain competitive and able to deliver to our customers over the long term.”

He added that the job cuts affect executives, managers and employees. Boeing had about 171,000 employees as of December 2023, according to an SEC filing.

“We have an aircraft manufacturer that is in very, very big trouble. What they did here is not a drill,” Mike Boyd, president of aviation consulting firm Boyd Group International, told Yahoo Finance on Friday after the job cuts were announced.

An ongoing strike by Boeing's largest union, the International Association of Machinists and Aerospace Workers (IAM), is proving costly for the company on several fronts.

The work stoppage has disrupted the company's recovery efforts, which include increasing production of its best-selling 737 Max jets to 38 per month by year's end, up from about 25 per month in June and July.

S&P Global estimates the cost of the strike will be around $1 billion per month after the company considers cost-saving measures in response.

Earlier this week, ratings agency put Boeing on CreditWatch Negative, increasing the likelihood of a downgrade if the work stoppage continues through the end of the year. Riskier credit makes it harder and more expensive for businesses to borrow.

S&P expects Boeing to experience a cash outflow of about $10 billion in 2024.

Wall Street analysts therefore assume that Boeing will have to raise cash through a stock offering. At the end of the second quarter, Boeing had a total of about $58 billion in debt and $12.6 billion in cash.

“Based on our discussions with investors, it should come as no surprise that Boeing is considering a capital increase. “We believe most investors expected the company to raise more than $10 billion, most likely after the machinists' strike ends,” JPMorgan analyst Seth Seifman and his team wrote in a recent note.

Analysts note that the size of the increase could depend on how long the strike lasts and that investors would be reluctant to commit while a strike is still underway.

The story continues

Earlier this week, the plane maker took a tougher stance against the union after a breakdown in negotiations this week left little hope of a quick resolution to the strike.

On Thursday, the plane maker filed an unfair labor practice lawsuit against IAM officials.

Boeing said that as a result of this week's arbitration, the company made further improvements over a previous offer, but “the union has not seriously considered these proposals and continues to insist on unreasonable demands.”

“The union’s public representation is misleading and makes it difficult to find a solution for our employees. We remain committed to reaching a compromise to end the strike,” Boeing said in a statement.

The move comes a few days after collective bargaining involving mediators failed and the aircraft manufacturer withdrew its contract proposal on Tuesday.

IAM did not immediately respond to a request for comment.

“This is just a move by (Boeing) to create some pressure. But like most strikes … it's going to end with them sitting back at the table and figuring it out,” New York City-based labor lawyer Nicole Brenecki told Yahoo Finance.

Union members quit the job on September 13 after turning down an interim contract. After the third round of negotiations collapsed on Tuesday, the union said Boeing was refusing to propose wage increases or accruing vacation and sick leave and would not reinstate a pension.

IAM has planned a rally for Tuesday.

Boeing shares have fallen about 40% since the beginning of the year.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her to X at @ines_ferre.

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