Boeing stockholders received two recent pieces of good news: A feared employee strike would not materialize, and the 787 Dreamliners cleared an important regulatory hurdle for sales to take off.
Employees at three different facilities in St. Louis had rejected Boeing’s most recent offer on July 24 and threatened to strike over retirement benefits. The International Association of Machinists and Aerospace workers said Boeing then sweetened the pot after “membership stood strong” and demanded more.
“The newly ratified modified offer features critical improvements to the company’s previous offer for retirement plans, including an $8,000 lump sum payment that can be deferred to an employee’s 401(k), and continuing the 4% company contribution and 75% match on the first 8% of an employee’s 401(k) contribution,” the union bragged on its website.
Meanwhile, the Federal Aviation Administration made moves that might keep those workers busy.
The FAA’s acting chief, Administrator Billy Nolen, was scheduled to meet with inspectors on Aug. 4, but that was reported to be essentially a formality after regulators determined the 787 Dreamliners should be cleared for sales to airlines again.
The 787 Dreamliners have faced multiple problems over the years, including fires onboard from the aircraft’s ion batteries. This time, 787 Dreamliner deliveries were halted over fuselage problems by the aerospace regulator in 2021.
Analysts estimate that this could be a huge cash cow for Boeing, and the stock has risen to reflect that. Morgan Stanley’s Kristine Liwag predicted sales of up to $17 billion just from planes already in Boeing’s inventory. One year ago, Boeing stock traded at $226.63 a share. It bottomed out at $115.86 on June 13 and had climbed steadily to $166.64 per share at press time.
The Washington Examiner asked Gary Leff, author of the influential View from the Wing website, if this means Boeing is back after several years characterized by crashes, regulatory problems, massive losses, layoffs, and management shuffles.
Leff said that it was “obviously a big win to begin to deliver 787s again” and explained that this could be a significant advantage for the company because “generally speaking, the economics of the 787 had been preferred over the Airbus A350.” That is, the 787 costs less.
Still, he doesn’t think the American aerospace giant is out of the woods yet. With 787 Dreamliners flying off the shelves, Boeing is “in a strong position on widebodies while lagging in narrowbodies,” he said.
The crash-prone 737 Max is still a problem for the company, which must have its latest iteration approved by regulators by the end of the year or have legislation passed by Congress to create an exemption from regulations on new planes to avoid a costly redesign.
Boeing CEO Dave Calhoun has gone so far as to tell trade journal Aviation Week that if the company doesn’t get regulatory approval by the end of the year or an exemption for the 737 Max 10s, it may simply walk away from manufacturing the planes altogether.
“This is a risk I’m willing to take,” Calhoun said. “If I lose the fight, I lose the fight.”
This led Leff to speculate, “I have to believe Boeing’s CEO is playing chicken.” He also thinks Boeing’s problems in the narrowbody market extend much further than the Max and may point to the absence of a customer service mentality at the company.
Boeing doesn’t really have “the aircraft suite to meet customer demand. They do not have a good replacement for the 757 and competitor to the A321XLR. They also don’t have a good smaller competitor to the A220. So they’re behind the curve with narrowbody products,” Leff said.
Still, he admitted Boeing being cleared to sell 787 Dreamliners again “will help them stop the bleeding on widebodies” and may lead to better things for the aerospace firm.
“The company has challenges still, but this is a key part of getting back on track,” Leff said.
