The Main Squawk: Negotiations at Boeing continue to stall, furthering the risk of a credit downgrade
Negotiations to resolve the International Association of Machinists and Aerospace Workers (IAM) strike at Boeing’s Washington State factories ended last week when management abruptly pulled the plug on talks. Chief Operating Officer Stephanie Pope asserted that the Company bargained “in good faith” and that new and improved offers were produced, but argued that the Union “did not seriously consider” its proposals.
In a leaked memo to Union members, the IAM Local 751 Negotiating Committee revealed that the Company wouldn’t budge from its previous “best and final” offer. The offer failed to include any additional wage increases, improvements to vacation and sick leave accrual, or what the Union really wants: 401(k) matching and/or a direct contribution (aka. what the IAM refers to as a “special company retirement contribution,” or SCRC).
Source: Leeham News and Analysis
The Company withdrew its “best and final” offer on Tuesday.
S&P Global Ratings, a credit rating agency, says the aircraft manufacturer will burn through $10 billion in cash this year and warns its bonds may be at-risk of being downgraded to “junk” status. Boeing had $13 billion in cash on hand at the start of the strike last month, and still has access to an untapped $10 billion line-of-credit.
United announced its largest international expansion ever with the addition of eight destinations ranging from Mongolia to Senegal. The expansion will touch each piece of equipment in the Airline’s fleet, including Nuuk, Greenland, and Ulaanbaatar, Mongolia, on its Boeing 737 fleet; Palermo, Italy, on its Boeing 767 fleet; and Bilbao, Spain, on its Boeing 787 fleet.
The expansion will kick off with the Company’s Summer schedule in 2025. When the schedule goes into affect, United will be the only U.S. airline to offer year-round service between Tokyo-NRT and Kaohsiung, Taiwan; and Washington-IAD and Dakar, Senegal. The Tokyo-NRT expansion also includes increased service on its Tokyo-NRT and Koror, Palau, route.
Die-hard Boeing 737 fans will be pleased to learn that this expansion unlocks the opportunity for passengers to fly from The Azores, Portugal, to Ulaanbaatar, Mongolia, entirely on United Boeing 737 metal with twelve stops in between. But anyone willing to put themselves through that kind of pain in the name of 737 fandom should 100% see a shrink.
Source: GC Mapper
American pilots oust Allied Pilots Association President Ed Sicher after a heated two-hour debate at Union headquarters in Fort Worth. Captain Ed Sicher was removed from his title by a 15-5 vote eight months ahead of the end of his term in office, which began in 2022.
Union leaders assert that members lost confidence in President Sicher for running poorly organized negotiations with the Company, mismanaging the administration of the Association, and cite multiple complaints from members who say the President “thanked” individual pilots for voting for certain candidates in the last election.
The “certain candidates” that were ultimately elected were known to be against the idea of a merger between the Association and ALPA, which American pilots have been exploring since 2022. At least one-quarter of the Airline’s pilot group are interested in exploring a merger with ALPA, according to an Association survey in 2022.
Delta confirmed an earnings hit in part due to its worst operational meltdown ever as a result of the infamous CrowdStrike outage. Despite the Company’s best efforts to mitigate the loss, the $380 million impact from the outage was just enough to prevent the Airline from meeting analyst expectations for Q3 2024.
In a conversation with CNBC, CEO Ed Bastian told auto and airline industry reporter Phil LeBeau that the CrowdStrike “havoc” deserves to be fully compensated for. He added that the the matter is now “in the hands of [the Airline’s] attorneys” and that they hope to come to a resolution soon.
The Atlanta-based airline exchanged harsh words with both CrowdStrike and Microsoft in the week following the disaster. The two IT vendors continue to argue that the assistance they offered to the Airline in the midst of the outage fell on deaf ears.
What We’re Watching This Week
Spirit is approaching the eleventh-hour to reach a deal that could save it from bankruptcy. The deadline to reach an agreement with its creditors is October 21.
Boeing issued a fix for the Captain’s seat on its 787 aircraft. Some airlines are concerned the fix may promote fatigue.
Hurricane Milton closed airports in Florida and triggered thousands of cancellations when it struck the state’s West Coast on Wednesday.
Uber is launching a shuttle service between Manhattan and New York-LGA for $18, helping crew members everywhere.
United will award 5,000 miles in compensation when lavatories overflow.
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