Airlines Hit By Boeing Strike

September 10th, 2008

As the strike at Boeing takes hold in its first week, the reverberations around the aerospace and airline sectors are already starting to be felt and the chorus of yet more disdain is likely to increase the longer the IAM members remain on strike.

Earlier this week, Spirit AeroSystems and Fuji Heavy Industries (FHI) both warned of the immediate impact the strike would be having on their business - so much so, in fact, that Spirit stated it would have to alter its 2008 financial guidance.

“The offer from Boeing that was on the table and accepted by the IAM pays more than due regard to what each and every individual member of the workforce has contributed. Before talks can recommence between all sides it seems reasonable to us that the workforce reduce a number of what may be termed unreasonable demands such as reduced outsourcing.

“As to the rest, it seems this may be down to a difference of 2% - a figure that if eventually paid by Boeing both the company and workforce may live to regret in the current commercial aerospace environment and when the current order book cycle really does turn down,” says Howard Wheeldon, Senior Strategist at BGC Partners in London.

Two of Boeings biggest customers have aired their fears about the strike and worry that the IAM action will hinder their businesses, already battling some of the highest fuel costs ever encountered in the airline arena.

Japan Airlines‘ President, Haruka Nishimatsu, was neutral on the strike but his views will strike a chord with many airline CEO’s.

Image courtesy of Japan Airlines

“Judging from experience, there is a possibility that (the strike) could last for two months or so, and I am worried about that,” he said.

“It all depends on the degree of impact from here. It’s not just the 787. Various planes, including the 737 and 767 would also be affected. I can’t say anything until I can take a comprehensive view of things.“

Japan Airlines is arguably one of Boeing’s most loyal customers, having never formally placed any order for Airbus airplanes.

Another big customer hit by the strike is Ryanair.

In statement, Ryanair said that its planned services from Edinburgh Airport would be delayed by several weeks because the carrier would not be taking deliveries of new 737-800’s earmarked to operate these flights.

Image courtesy of Boeing

“We sincerely regret the postponement of the opening of our Edinburgh base but unfortunately the two new aircraft, which we had reserved for this purpose, are now indefinitely delayed due to a strike by Boeing employees. However, due to increased aircraft availably in our fleet from early November we will be able to operate these exciting new Edinburgh routes from 5th November.
 
Passengers who were booked to travel on our new routes during this initial six week period will be refunded over the next seven days. We sincerely apologise to all our passengers for the inconvenience caused by this forced change to our schedule. However, we look forward to seeing our Edinburgh passengers on board our state of the art aircraft from 5th November,” said Michael Cawley, deputy CEO at Ryanair.

Affected services from Edinburgh Airport include flights to Lodz, Malaga, Bournemouth, Palma, Krakow, Poznan, Bratislava, Schonefeld, Billund, Skavsta and Wroclaw.

Like Japan Airlines, Ryanair has never ordered from Airbus and is considered a Boeing stalwart customer.

Given the infancy of the strike itself, the longer it goes on, more and more Boeing customers will end up issuing statements on how the strike is affecting their business and flight operations.

“By attempting to hold the company to ransom and using the order book strength as a tool the workforce could be digging its own long term grave. Boeing’s success in terms of profit growth and shareholder reward these past few years isn’t just to do with the excellence of aircraft produced and strong sales.

It has been about the investment led competitiveness that it has achieved along with significant dollar benefit against its main competitor. It is a plan that has worked and that investors would not wish to see reversed by the company giving in to unreasonable demands from a workforce [union] holding a gun to its head,” says Wheeldon.

Perhaps then, it may just be asked by analysts, suppliers and airlines - is the IAM union really looking after its members interests with this strike or is this simply a show of force to bring Boeing to its knees due to fears of outsourcing work on the 737 and 777 replacements?

Whatever the answer, the chances are Boeing will likely view the hostility as further ammunition to farm out greater work share to the likes of the three major Japanese “heavies” (Fuji, Kawasaki & Mitsubishi Heavy Industries) if this strike is not concluded soon.

If that the leads to the inevitable jobs cull in the Puget Sound area, the voices of employee discontent may be wielded directly at the very union the employees place much faith in.

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