Boeing, the second largest aircraft manufacturer in the world, is facing a multiplicity of crises, but the wholly peculiar nature of the industry makes it unclear how these will unfold.
The company is losing money, and has been for some years. The Max 737 was supposed to be the solution. It seemed like a very competitive product, but two crashes and 346 fatalities in a short space of time led to production being suspended. Investigations uncovered whistleblowers saying safety procedures were being compromised. Then a door plug flew off a 737 in flight. Although there were no fatalities, the huge publicity surrounding the issue was a massive blow to the company.
And now it faces a strike by machinists seeking a big pay rise and promises that jobs will not be relocated from Washington State to South Carolina, a right-to-work state where employees cannot be forced to join a union.
The company is seeking to borrow $25 billion and credit rating agencies warn it faces the risk of being downgraded to junk.
Surely this is a great opportunity for the strikers to win their struggle. The company is borrowing at great cost and is already facing a backlog in delivering its orders. How long can it hold out?
Well, the answer may be that it can hold out longer than the strikers. There is a multi-year lead time on orders just in the ordinary course of events. A delay of six months or a year on product that the customer is not expecting before the end of the decade can probably be negotiated or perhaps the time can be made up. Immediate term deliveries were already delayed by regulatory action.
Nor can Boeing lose orders to a rival. Its only significant competitor is Airbus, which is also struggling and also facing a backlog. It is not in a position to take on new orders for short-term delivery.
Of course, it is difficult for Boeing that it is trying to shed staff at a time when it cannot handle existing orders. That would normally be an opportunity to expand its manufacturing capacity.
So, what is the resolution?
Could the business be acquired by new management? That's definitely a possibility, but it would not solve the short-term problems. Manufacturing bottlenecks and regulatory issues cannot be simply wished away. A takeover bid is probably not an available solution for the backlogs at Airbus, as around 25% of the shares are owned by European governments (Germany, France, and Spain) and a hostile takeover would need approval by worker representatives.
That so much manufacturing capacity is held by just two companies means that the market could not quickly adapt to the failure of either of them. That may be the lifeline that keeps Boeing alive.