Sept 16 (Askume) – Boeing Co (BAN) could lose more than $100 million in daily revenue unless it reaches a settlement with unions representing more than 30,000 workers, analysts said on Monday .
Seattle-area Boeing Co. workers at U.S. West Coast plants that build the plane maker’s most popular 737 Max and other jets went on strike last week for the first time in 16 years after rejecting a full contract.
A prolonged strike could lead to billions of dollars in losses, worsening the aircraft manufacturer’s already troubled financial situation and threatening to downgrade its credit rating.
The strike is Boeing’s first since 2008 and the latest in a tumultuous year for the company, which has been split in the middle. The stock has lost about 40% of its value so far this year.
Northcoast Research estimates the total impact of the strike could be $3 billion or more. “Boeing could cancel 33-35 jets from the original production plan, resulting in a loss of $102 million in daily revenue,” said Chris Olin, an analyst at Northcoast Research.
New Chief Executive Kelly Ortberg took over a few weeks ago to restore confidence in the plane maker, which is now facing a labor dispute. The company’s safety practices have also faced intense scrutiny from US regulators.
Last week, all three major rating agencies warned that the company could be stripped of its investment grade if the strike lasts too long. That would raise borrowing costs for Boeing, which already has $60 billion in debt.
“We estimate the strike will reduce sales by about $100 million per day compared to 2008, as sales are currently higher,” said TD Cowen analyst Kai von Rumohr.
Boeing’s financials are already under pressure due to negative free cash flow and low profit margins. Aircraft manufacturers need to generate enough cash flow to repay debt.
On Monday, Boeing said it would freeze hiring and consider temporary layoffs to control costs .
TD’s von Rumohr said each day above $100 million in revenue saves $60 million in cash because the aircraft manufacturer receives 60% of the plane’s price upon delivery.
Analysts at Jefferies said the strike would result in a monthly free cash flow hit of about $1.3 billion.
