Some 33,000 machinists at the Boeing
Company are on strike after rejecting a contract proposal, and the longer it
goes on the worse it could be for the aviation industry.
For one, Boeing is already dealing with
enough problems and scrutiny stemming from the January 5 incident in which a
door panel blew off an Alaska Airlines plane in midair. It was revealed that
the company has been losing
money for years.
A strike not only slows down production
but slows Boeing from salvaging its battered reputation.
A lengthy strike would also virtually halt
production of the 737 Max, Boeing’s best-selling plane. TD Cowen analyst Cai
von Rumohr said the current walkout could last into mid-November.
“Boeing needs to keep making these
(planes) because Boeing has been hemorrhaging money because of their safety
problems,” said Art Wheaton, director
of labor studies at Cornell University’s School of Industrial and Labor
Relations. “And safety problems are quite often caused by understaffing.”
Fitch Ratings said Boeing’s credit rating
wouldn’t feel the effects of a one- or two-week strike but Boeing work
stoppages have
traditionally averaged about six weeks. So, airlines and airline passengers
might not feel the pinch right away, but as the holidays draw close they will.
Boeing has been able to survive previous
strikes, but this one comes amidst heightened scrutiny and federal inquiries
into safety protocols. For instance, a strike 16 years ago cost the company
$100 million daily. But it was obviously able to weather the storm. There
seems to be some uncertainty about what a lengthy strike would mean this time.
“Boeing has every incentive to negotiate a
deal in good faith, and within a short time frame,” analysts from RBC Capital
Markets wrote in a note Friday. “Any prolonged delay” would “put significant
strain” on the company’s free cash flow.”
Airlines still waiting on deliveries
It was also estimated that
United States-based airlines would be most impacted. Alaska Airlines,
American and United combined were expecting to receive at least 33 planes by
the end of the year – a prolonged strike could inhibit that.
Southwest Airlines also receives most of
its blamed from Boeing.
“Earlier this year, Southwest Airlines
took steps to address potential delivery disruptions," the
carrier said. "As a result, we currently have the fleet needed to
fulfill our upcoming schedules. We remain in close communication with Boeing.”
"There will probably be very little
direct impact on consumers as a result of the Boeing strike," analyst
Harry Harteveldt told NBC News.
But most analysts do not expect the strike
to last that long, because this time Boeing is in a particularly vulnerable
position and is likely to settle.
“We remain committed to resetting our
relationship with our employees and the union, and we are ready to get back to
the table to reach a new agreement,” Boeing said in a statement.
Boeing Chief Financial Officer Brian West
acknowledged the strike could hurt aircraft deliveries and “jeopardize” the
company’s recovery.
Right now, the company is offering a 25 percent wage
increase over four years, while the machinists want 40 percent.
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