Boeing's (NYSE: BA) largest union, the International Association of Machinists and Aerospace Workers, is in its third day of a strike that's idled 27,000 workers. An aviation consultant argued that the strike could last more than a month, if history is any guide, Bloomberg News reported Tuesday. However, Stock Analyst C. Leonard Bauer said what counts in work stoppages is not so much company/sector precedent, but "the reality of the facts on the ground ... the nature of the issues involved." Bauer added that he does not have a rating on nor own shares in Boeing.
"The two sides are reasonably close on the standard pay increase, it's pension payment increases and the use of outside contractor for work that the two sides are far from agreement on," Bauer said. "Boeing is booming now and the IAM wants some assurance that their retirees' pension will not go the way of other corporate pension plans, which were revised lower as corporations faced tougher times. The two sides are still pretty far apart on that issue, as well as on the use of outside contractors." Boeing's shares rose 80 cents to $64.71 in Tuesday morning trading.
Given the above, a strike of less than a month "would be a moral victory," Bauer said.
Boeing has to produce about 40 planes per month to keep pace with its record order backlog. "In an organization as large as Boeing, work lost from a strike of three weeks or less can be made up with overtime, moving or postponing vacations, and wringing-out a few more inefficiencies in the system," Bauer said. "But once the strike gets into five, six, seven weeks in length, Boeing will then be forced to delay delivery dates."
And those delays would include delaying -- for a fourth time -- delivery of the first 787 Dreamliners, Boeing's next-generation airplane. "Both the company and the union know the stakes. Another delay of the 787 and airlines, particularly foreign carriers, will probably start canceling 787 orders," Bauer said. "And that would devastate the company and the union, so both sides need to come to their senses and reach a fair agreement."
A considerable portion of Boeing's revenue growth in the next decade will hinge on the company's ability to position the new 787 Dreamliner in the global aviation marketplace -- an operational stance that assumes on-time delivery of the planes, and no further delays, Bauer said. The first 787s are expected to be delivered in Q3 2009.
Global battle
United States-Boeing and European Union-based Airbus are engaged in a global contest for market share and in a battle to determine which air travel model will best meet the needs of air travelers in the initial decades of the 21st century.
Boeing argues that point-to-point, fast, creature-comfort-filled air travel characterized by the next-generation 787 Dreamliner, will be the era's defining air travel flight. Conversely, Airbus argues that superjumbo A380 air travel, which features lower ticket prices, larger seating capacity and longer ranges, will be the flight most preferred by airlines and air travelers.
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