Boeing's withdrawal from wage negotiations intensifies pressure on the aviation industry

The tense situation at Boeing is further worsening after the company withdrew its wage offer for striking employees. The ongoing strike of the 33,000 skilled workers continues to cause production halts in the fourth week for the successful models 737 Max, 767, and 777. With growing financial pressures, Boeing might have to shoulder monthly costs of about one billion US dollars according to S&P Global Ratings. The stalemate in negotiations with the union International Association of Machinists and Aerospace Workers District 751 resulted in a 2 percent decline in Boeing's stock price by Wednesday noon in New York. Robert Stallard, an analyst at Vertical Research Partners, warned that Boeing might have to resort to drastic measures to curb the cash outflow, including layoffs and cuts to suppliers. These measures could further destabilize the already fragile supply chain. There is also a risk that Boeing's debt might be downgraded, which would represent a setback for the prestigious company. Meanwhile, European competitor Airbus is also struggling with similar challenges. In September, Airbus recorded a 9 percent decline in aircraft deliveries and faces the challenge of reaching the annual target of about 770 aircraft. Even before the rejection of the latest wage offer, Boeing had announced it would suspend most orders with suppliers and introduce short-time work for some employees. The company is grappling with the aftermath of an accident in January and the increased demand following the pandemic. The British company Senior, a supplier to Boeing and Airbus, is also feeling the impacts of the strikes and delivery issues. The company plans to reduce staff and announced reduced deliveries for a customer in the fourth quarter. Analysts primarily see the strike situation as a threat to smaller suppliers, while larger, well-capitalized companies are more likely to remain stable. Nick Cunningham of Agency Partners emphasizes that leading suppliers could support smaller companies to avoid financial bottlenecks.