On Monday (Nov. 18), Boeing announced it would cut 2,500 workers in Washington State, Oregon, South Carolina, and Missouri as part of a plan to trim 10 percent of its global workforce, affecting 17,000 jobs. Boeing shares climbed 2.6 percent following the announcement and has gained more than 6 percent as of Friday’s close.The small bump was likely a relief to Boeing executives who have seen the company’s share price plummet 40 percent this year.
Boeing is in the middle of a financial and reputational crisis that could threaten the legacy of the iconic American company. “I would not buy [Boeing stock] at any price. The company is in serious, serious trouble,” Aswath Damodoran, a finance professor at New York University and a renowned valuation expert, said on the Prof G Markets podcast recently. “I’ve never seen a company blow up its reputation as thoroughly and as completely as Boeing has done over the last 20 years.”
The Seattle-headquarter aerospace and defense giant has been struggling with a decade of reputational decline, which came to a boiling point in January when a large panel blew off a two-month-old 737 Max airplane during a flight. While the pilot was able to safely land the plane, the incident revealed Boeing’s poor quality control during the manufacturing process.
A subsequent six-week investigation led by the Federal Aviation Administration (FAA) uncovered several instances where Boeing fell short of meeting manufacturing quality control standards. In May, the FAA implemented a corrective action plan requiring the company to submit a comprehensive proposal detailing completed and ongoing measures to enhance safety, streamline operations, improve supplier oversight, and bolster employee training and internal audits. Boeing’s work in adhering to the plan is still ongoing.
Even before the January incident, Boeing’s public image was already hanging by a thread. Two crashes involving Max 8 planes in 2018 and 2019 claimed 346 lives, prompting a global grounding of the aircraft that lasted approximately 20 months. In 2019, a New York Times investigation of hundreds of pages of internal Boeing emails suggested that the company repeatedly prioritized speed over safety in order to stay competitive against rival Airbus. “I’ve told my wife that I never plan to fly on [Boeing planes],” Joseph Clayton, a Boeing technician, told the Times in 2019.
A second New York Times investigation, published in May, suggested that Boeing continued to ignore safety red flags, citing anonymous employees who said the culture of speed-over-quality had been ongoing for years and had worsened despite the 346 lives lost due to Boeing aircraft malfunctions.
Boeing and Airbus together own 100 percent of the global commercial aircraft market. But Boeing executives face growing pressure from investors to catch up with Airbus, which owns about 60 percent of the market. Since 2019, Airbus has delivered 3,800 planes, while Boeing has delivered only 2,100.
Boeing’s new CEO, Kelly Ortberg, who took the job in August, is trying to clean up an impossible mess. His first challenge was negotiating an agreement with labor unions, putting an end to a seven-week strike. The strike paused nearly all of Boeing’s production at a crucial point for the company, further digging the company’s financial grave.
In October, Boeing sold shares to raise $21 billion, which Ortberg said will be used to save the company’s balance sheet. Ortberg is also reportedly considering selling Boeing’s space unit—a major NASA contractor that has played a crucial role in building and maintaining the International Space Station.
Despite these warning signs, several investment banks give Boeing a consensus “buy” rating, signaling they believe the company will be able to recover. The most bullish, UBS, has a stock price target for Boeing of $315, more than double its current price of $148.
There are some signs of resilience for the company: Boeing brought in $17.84 billion in revenue during the July-September quarter, a small 1.5 percent dip from the same period last year. The company’s yearly revenue has grown steadily: in 2023, it pulled in $77.80 billion, a 16.8 percent increase from the year prior.
And, despite its reputational crisis, Boeing continues to receive new orders. Earlier this month, Avia Solutions Group, a global aircraft, crew, maintenance, insurance (ACMI) provider, ordered 40 new 737-8 aircraft models with the potential to order an additional 40 in the future.
