[Business & Issues] Boeing Strike Hits Hard... "Fighter Jet Production Delayed"

Over a Month-Long Strike Causes Nearly 7 Trillion Won in Losses
Backlog of Over 5,400 Aircraft Production Orders
US and Israel Pressure to Resume Fighter Jet Production

[Image source=Getty Images Yonhap News]

The prolonged strike at Boeing has delayed the production of over 5,400 aircraft and is even disrupting fighter jet manufacturing. In Israel, which has engaged in conflicts with Hamas, Hezbollah, and Iran, the U.S. government is pressuring Boeing to expedite fighter jet deliveries. Boeing aims to overcome its management crisis by securing large-scale liquidity through stock and bond sales, but if the strike continues, significant damage to both civilian and military sectors will be inevitable.

Relief after liquidity measures announced... but concerns over prolonged strike remain

The strike, which began on the 13th of last month (local time) involving about 33,000 Boeing unionized mechanics, has now lasted over a month, expanding the damage caused by halted aircraft production. Consulting firm Anderson Economic Group estimates that the losses incurred so far by Boeing headquarters, workers, shareholders, and partners due to the strike amount to $5 billion (approximately 6.8625 trillion KRW).

Boeing's stock price, which plummeted due to various aircraft structural defects and poor performance, has struggled to recover amid the strike's impact. Starting the year at $251.76, Boeing's stock currently hovers around the $150 level. Although the announcement of a capital raising plan of up to $35 billion on the 15th led to a slight rebound, the stock remains over 38% below its early-year level.

According to Bloomberg, Boeing recorded operating losses totaling $33 billion over six years since 2018. Its debt has nearly quintupled from $11 billion in 2018 to $53 billion as of the end of Q2 this year. With $11.5 billion in debt maturing in February 2026, concerns over worsening liquidity have been raised.

In this context, the breakdown of wage negotiations with the union and the subsequent strike on the 14th of last month caused all aircraft production plants to halt simultaneously, intensifying the crisis. At that time, the Boeing union demanded a 40% wage increase and restoration of defined benefit (DB) pensions, but management refused, citing worsening business conditions, leading to a negotiation deadlock.

The company announced plans to raise $35 billion in capital through loans, bonds, and stock sales and to reduce its global workforce of 170,000 Boeing employees by 10%, or 17,000 workers, to avoid a management crisis. However, with ongoing negotiation failures, it is expected to take a long time before production and operations normalize.

Furthermore, the Q3 earnings report scheduled for release on the 23rd is expected to be poor, increasing the likelihood of further stock price declines. Credit rating agency S&P Global Ratings warned, "Boeing is expected to record a loss of $9.97 per share in Q3, with pre-tax amortization costs of $3 billion in the commercial aviation sector and $2 billion in the defense sector," adding that "Boeing's credit rating could be downgraded to non-investment grade."

5,490 aircraft orders delayed... Domestic airlines like Korean Air also affected

Boeing 747 Max assembly plant in Renton, Washington, USA. Production is significantly delayed due to a long-term strike.
[Image source=Reuters·Yonhap News]

As the strike prolongs, aircraft production delays have become severe. Production of key models such as the Boeing 737 MAX, along with Boeing 767 and 777 passenger aircraft, has been halted, and parts supply disruptions have affected the Boeing 787 Dreamliner plant. Currently, approximately 5,490 aircraft orders are backlogged.

New aircraft deliveries to domestic airlines like Korean Air, which had contracts with Boeing, are also expected to be delayed. In July, Korean Air signed a memorandum of understanding (MOU) to purchase 50 aircraft from Boeing. Jeju Air also signed a supply contract for 50 Boeing 737-8 aircraft in 2018 and has been receiving deliveries since November last year. Jin Air, T'way Air, and Eastar Jet also planned to introduce Boeing aircraft such as the 737 model.

Foreign airlines are also struggling with production delays. Taiwan's China Airlines (CAL) faces delays in receiving Boeing 777 freighter aircraft. Hong Kong's Cathay Pacific and Germany's Lufthansa have announced plans to modify existing aircraft to cope with delivery delays.

U.S. and Israel simultaneously pressure resumption of fighter jet production... Concerns over Iran's air defense enhancement

An image of Boeing's F-15EX fighter jet, newly ordered in 50 units by Israel last August. [Image source=Boeing official website]

The defense sector is experiencing even more severe production delays. Fighter jets already ordered are not being produced on time, affecting conflicts in the Middle East. The Israeli government is particularly vocal in its opposition.

According to U.S. defense market research firm Forecast International, the Israeli government is pressuring Boeing, along with the U.S. government, to accelerate production of the 50 Boeing F-15EX fighter jets ordered in August. Forecast International stated, "From Israel's perspective, preparing to strike Iran's air defense network, the delivery of the high payload-capacity F-15EX is urgent," adding, "The Israeli Air Force is rushing to import F-15EX fighters fearing that Iran might first acquire and deploy Russia's S-400 air defense system."

Not only the F-15EX fighter jets but also various military aircraft produced by Boeing's defense division?including the P-8 maritime patrol aircraft, KC-46A aerial refueling tanker, and E-7 early warning and control aircraft?have all halted production due to the strike. Middle Eastern oil-producing countries such as Saudi Arabia and Qatar are fiercely competing to secure the production quantities delivered first amid the increasing likelihood of fighter jet delivery delays.