Boeing union strike won't last too long, analyst explains why

Boeing (BA) factory workers are out on the picket line for the first time in 16 years after nearly 96% of its union members voted to reject a tentative labor agreement and go on strike. Bloomberg Intelligence analyst George Ferguson joins Morning Brief to break down the news and how it may add to an already rocky year for the company.

Ferguson believes that the strike is "extremely significant" to Boeing's second-half recovery as it looked to deliver more of its 737 jets. "It's their money-making airplane, best cash generator, best profit generator. So to have deliveries get shut down on that is really problematic for their financials," he explains

Ferguson notes that the workers on strike are likely looking at the agreement at Spirit AeroSystems (SPR), and will likely seek higher pay and a bigger commitment on the successor to the 737. "The way the commitment was written, Boeing sort of guaranteed to the union that they would build that airplane in the Pacific Northwest if it was launched in the next four years. I suspect they would want maybe a bigger commitment on that... That would ensure union jobs on the most important program," Ferguson highlights.

He adds that the aircraft manufacturer has "really been sort of squeezing the union over the last bunch of years to try to improve financials, and I think they get a sense now for what their value is to the company." The company will likely have to "give ground" to the union since it "needs the workers right now more than the workers need Boeing." With this dynamic at play, Ferguson doesn't expect the strike to last long.

However, if the strike persists for a longer period of time, there will be "ripple effects through the aerospace supply chain," and airliners like Southwest (LUV) and United (UAL) will be impacted most by a stoppage in deliveries. Ferguson expects these effects to be felt within a week: "I just don't see management teams going down there and getting that many airplanes completed and out to customers."

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This post was written by Melanie Riehl