Boeing strike tests which side can best withstand financial losses

Boeing is set to restart negotiations this week with a union representing 33,000 workers who walked off the job last week, demanding better pay and retirement benefits.

Away from the bargaining table, the company and its employees face a test of wills over the financial losses they're willing to withstand should the standoff potentially stretch on for days, weeks or longer, experts told ABC News.

Workers will face a significant pay cut as they rely on relatively meager strike payments from the union to pay their bills. Boeing, meanwhile, could risk billions in lost revenue, as well as a credit downgrade that would threaten to balloon its already substantial debt.

"Each side is going to lose income," Harry Katz, a professor of collective bargaining at Cornell University's School of Industrial and Labor Relations, told ABC News. "It's a question of which side is able to sustain that."

Boeing reached a tentative agreement last week with the International Association of Machinists and Aerospace Workers (IAM), the union representing tens of thousands workers at Boeing plants in Washington State, Oregon and California.

However, 94.6% of union members voted last Thursday night to reject the tentative agreement. IAM's members went on strike at midnight on Friday after 96% of them voted in favor of the action.

In response to an ABC News request for comment, Boeing shared a message sent to union members by CFO Brian West on Monday.

“This strike jeopardizes our recovery in a significant way and we must take necessary actions to preserve cash and safeguard our shared future. Importantly, we will protect all funding for safety, quality and direct customer support work,” the message said.

The IAM did not immediately respond to ABC News' request for comment.

Union members are set to receive $250 per week from a strike fund, beginning in the third week of the work stoppage. That compensation would mark a major pay cut for many of the employees.

Mid-ranking workers involved in the strike typically make $20 per hour, which totals $800 per 40-hour work week, while higher-paid members earn salaries upward of $100,000 per year, or nearly $2,000 per week.

By comparison, the strike payments would amount to about half of the weekly income received by members of the United Autoworkers during their six-week work stoppage last year.

"If the workers haven't saved enough money – and that's a difficult thing to do – at some point their savings accounts will be depleted," Henry Harteveldt, a travel industry analyst at Atmosphere Research Group, told ABC News.

Even so, IAM workers voted overwhelmingly in favor of a strike despite its financial risks, experts said. The most recent IAM strike against Boeing in the Pacific Northwest, in 2008, lasted 57 days. Work stoppages undertaken by unionized Boeing employees in the same region have historically lasted an average of 60 days, a Bank of America Global Research analysis found after examining seven previous strikes, the earliest in 1948.

"This is why unions have war chests," Richard Aboulafia, managing director of aerospace consulting firm AeroDynamic Advisory, told ABC News.

If the current strike continues for several weeks, financial pressures will mount for Boeing, experts said. The company is already weathering financial pressures in the aftermath of management mishaps and high-profile product failures, they added.

On Jan. 5, a door plug blew out of the company's 737 Max 9 aircraft at around 15,000 feet in altitude during an Alaska Airlines flight, prompting a federal investigation. The renewed scrutiny arrived roughly five years after Boeing 737 Max aircraft were grounded worldwide following a pair of crashes in Indonesia and Ethiopia that killed a combined 346 people.

The Federal Aviation Administration mandated a production cap of 38 737 Max planes per month from Boeing earlier this year following the door plug incident. Boeing recently delayed until March 2025 a production increase that was scheduled to begin this month, Bank of America Global Research said.

"The story for Wall Street is that Boeing needs to get that 737 Max production rate going," Tony Bancroft, portfolio manager at financial firm Gabelli Funds, which focuses on the aerospace industry, told ABC News.

Boeing is carrying nearly $60 billion in debt, Stephanie Pope, Boeing Commercial Airplanes president and COO, noted in a letter to union members earlier this week. The company's share price has plummeted almost 40% since the start of 2024.

A strike would cost Boeing $108 million per day in lost revenue, amounting to between as much as $5.5 billion in losses should the work stoppage last 50 days, investment bank TD Cowen said in a report reviewed by ABC News. Fitch, a credit rating agency, said on Friday that the company's credit could be reduced to junk status if the strike lasts longer than a couple of weeks.

"The company is in a very tough spot," Aboulafia said.

Despite Boeing's financial vulnerability, some experts said the company has reason for optimism in an industry where it holds significant market share and has only one major competitor: Airbus.

"Boeing's long-term financial outlook is quite solid, even though they face a fair amount of debt," said Katz, of Cornell University.

For now, both sides appear prepared for a high-stakes game of chicken.

"The key question is: How long are they willing to suffer?" said Bancroft, of Gabelli funds.