By Allison Lampert, David Shepardson, Tim Hepher
(Reuters) -U.S. Acting Labor Secretary Julie Su flew to Seattle on Monday to try to ease a Boeing (NYSE:BA) machinists strike, as thousands of employees face layoffs and a major airline reacted with alarm to the planemaker's deepening turmoil.
Su's first in-person intervention, reported by Reuters and confirmed by the Labor Department, comes days after Boeing - dealing with a crippling strike now in its fifth week - unveiled plans to cut 17,000 jobs and take $5 billion in charges, continuing a year of tumult for the company.
"Acting Secretary Su is meeting with both parties today to assess the situation and encourage both parties to move forward in the bargaining process," a spokesperson said.
While Su has previously spoken with Boeing and the union, it is her first time in Seattle meeting both sides in person, the spokesperson said.
Roughly 33,000 workers have been on strike since Sept. 13, seeking a 40% wage increase and the restoration of a defined-benefit pension they agreed to give up in 2014.
The International Association of Machinists and Aerospace Workers was not immediately available for comment. Boeing and a White House spokesperson declined to comment.
Shares of the aerospace giant were down 1.2% on Monday following the company's surprise after-hours announcement on Friday, which also included a new delay to the 777X jetliner and the ending of civil 767 freighter production.
Boeing will hold meetings this week to lay out detailed plans, having given few specifics in Friday's announcement, industry sources said. The company also expects a quarterly cash burn of about $1.3 billion, better than anticipated, but still the third consecutive quarter it has burned through cash.
Boeing is expected to refrain from asking for voluntary departures to limit severance cash and avoid an exodus of skills, sources said, adding the company will rely mainly on involuntary layoffs. Rivals are scooping up scarce labor to relieve pressure on aerospace supply chains.
"The trick will be not losing the 10% of people you want to keep, which is even more important than usual in the post pandemic skill shortage environment," said Agency Partners analyst Nick Cunningham.
INDUSTRY ALARM
The one-year delay in 777X deliveries to 2026 was widely expected in the industry and brings the lag in delivery of the 777 mini-jumbo successor to six years amid certification and testing delays.
Emirates Airline President Tim Clark, whose initial order for 150 jets helped launch the world's largest twin-engined jet more than a decade ago, hinted at commercial repercussions.
"We will be having a serious conversation with them over the next couple of months,” he said in a statement. "I fail to see how Boeing can make any meaningful forecasts of delivery dates."
He also became the first senior industry figure to articulate fears, whispered privately by some industry leaders in recent weeks, over Boeing's ability to tackle its worst-ever crisis intact.
"Unless the company is able to raise funds through a rights issue, I see an imminent investment downgrade with Chapter 11 looming on the horizon," Clark told the Air Current aviation news service.
Emirates is the largest user of the 777 jet family, a long-distance workhorse whose original success has been clouded by delays to its successor and the crisis engulfing Boeing's smaller 737 cash cow over safety and quality issues.
Friday's package of announcements showed Boeing has just over $10 billion of gross cash, a much-touted level that analysts said would ease some near-term pressure, though the company still needs to raise money by year-end, they said.
Most analysts expect Boeing to be able to raise up to $15 billion through a share issue. But the perception of major airlines to Boeing's financial risk remains a sensitive topic as many have billions of dollars of deposits sitting with the planemaker - an exposure some already want to limit because of delays, industry sources say.
Boeing declined to comment on Clark's remarks.
Ratings agency S&P has warned Boeing risks losing its prized investment-grade credit rating.
Meanwhile, U.S. Secretary of the Army Christine Wormuth on Monday said recent layoff announcements were not expected to disrupt its programs, which include helicopters and munitions.