(MENAFN- Live Mint) Planemaker Boeing is facing another challenge. As if the existing ones weren't enough, the machinists union overwhelmingly voted for a strike, rejecting the contract which was offered and the strike has now begun. This comes within a week of Boeing calling this contract“historic”. The strike, the first in 16 years, coincides with the first full negotiation of wages in as many years, with the last two being extensions of the contract signed in 2008. About 30,000 workers in the Seattle and Portland areas have started the strike, which started at 0001 hours on Friday, September 13.
Boeing put out a What to Expect page for striking workers, which clearly mentions that they would not be paid for the strike. However, the aeroplane maker did say that it hopes to work out a solution and a new contract soon.
Also read: Boeing Union deal sparks outrage as workers demand higher wages, pension restoration
In July this year, Boeing announced the acquisition of Spirit Aerosystems after being constantly on the radar of the Federal Aviation Administration (FAA) for quality issues and not being allowed to increase the production rate of its planes till quality issues are fixed. Recently, Boeing's 777X was grounded during the testing phase as issues with engine assembly came to the fore. The aircraft is already delayed for its Entry In Service (EIS).
Also read: Boeing agrees to buy Spirit Aero for over $4 billion in an all-stock deal, says report
Will there be an impact on India? It remains unclear how long the strike will last. Both Boeing and the union would soon be back at the table along with back-channel talks to ensure that the impasse is resolved. However, until then, the production will come to a near halt and so would be the deliveries, in most cases.
Akasa Air has a couple of aircraft ready for delivery and took delivery of its 25th aircraft recently, after a lull since February 2024. This was the first aircraft it took this financial year. The delay of a plane ready for delivery could mean it may have to withhold its planned expansion and the airline will hope that the delivery is done before the peak Diwali period. Apart from this, the airline may also miss out on the immediate Sale and Leaseback gains.
The other carrier to be impacted could be Air India Express. The airline had declared that it would induct 50 planes in 15 months in October 2023. Over 30 have been inducted in 11 months and the next one and a half dozen planes could already be impacted due to rework. A strike now means there could be further delay and derailment in the induction plan, which would likely lead to Air India Express not being able to achieve the target of 50 planes by mid-January of next year. The airline, though, may not be as worried as Akasa Air about Sale and Leaseback income but would have its sights on the precious slots at airports, which could go to competition.
Also Read: Boeing 737 MAX production faces fresh turbulence as 96% workers at US factories vote for strike
SpiceJet also has the MAX on order but is not in a position financially to induct any. In fact it has seen a handful of MAX in its fleet being flown out by lessors for lack of payments and continues to struggle with finances. The airline has relied on wet/damp leased aircraft in the past. A delayed delivery schedule due to strike could mean that wet leases are in demand and will see the costs go up, impacting SpiceJet - indirectly.
The impact of the strike on the B777X remains uncertain. The aircraft was to enter commercial service in 2020 but is now slated for the second half of 2025, which could see further slip-up. IndiGo has no Boeings on order, while Air India's Dreamliner order will be serviced from Boeing's plant in South Carolina and not Washington, where the strike is in progress.
Vendors in India
Boeing sources over $1 billion worth of services and goods from India, for a mix of both civil and defence products, with the split remaining confidential. How much of an impact this has on the suppliers in India will be known over the next few weeks and will depend on how long the strike lasts. In the global connected supply chains of today, the impact beyond the core striking area is a common phenomenon.
Tail Note
This year, the airline has had a new CE and this is not the best of welcomes for any CEO, lesser so at the troubled plane maker. Ironically, the planemaker has continued to make statements around quality being core to its business and that it has taken all actions needed to maintain it, yet has seen one incident after another. This is especially surprising since the MAX was grounded following two deadly crashes. The union's decision to strike is either a hard reset, much needed for the business or another thorn in the aeroplane maker's recovery. As Airbus struggles to find slots for airlines, Boeing's chance to capture its faltering market has had another hit.
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