Boeing cuts commercial staff as its backlog grows and the 737 runs below its target rate

Boeing (NYSE: BA) told staff on Monday, November 9, that it plans to cut 5% of its commercial airplane workforce, CNBC reported from a memo by the unit's chief, Stephanie Pope. The cuts come in the same weeks in which Boeing's own releases show a record backlog, a new certified jet and one of the largest lessor orders for the 737 MAX.

Read together, the company's filings and statements since mid-October point to one constraint: Boeing has more orders than it can build at its current pace, and the pace, not demand, now sets its costs.

A memo that blames the production schedule

Boeing plans to reach the 5% reduction "through a combination of attrition and layoffs," with notifications beginning in December, according to CNBC. "Adjusting our production schedules and reducing aircraft output puts us in an overstaffed position," Pope wrote, according to the report. CNBC said Pope told staff the company is "still working to stabilize production rates of its bestselling 737 Max planes."

The memo itself has not been published by Boeing, and the company has not released a headcount figure for the cuts. Neither the CNBC report nor Boeing's releases give the number of employees in the commercial airplanes unit.

The 737 is still below the rate Boeing is aiming for

Boeing delivered 124 737s in the third quarter and 367 in the first nine months of 2026, according to its delivery release of October 13. That is an average of about 41.3 a month in the third quarter (computed).

In its third-quarter results on October 27, Boeing said "the 737 program continues to progress toward stabilized production of 47 per month." The 787 program "remains stable at a production rate of 8 per month," and the 777X "remains on track for first delivery in 2027," the company said.

The results also hint at the memo's cost logic. The commercial unit's operating margin of negative 6.5% reflected, among other things, "higher projected costs associated with future production rate adjustments and higher estimated supply chain costs," Boeing said. The unit lost $697 million in the quarter on revenue of $10.72 billion, after a loss of $5.35 billion a year earlier that included a charge on the 777X program.

Orders keep arriving faster than jets leave

Demand has moved the other way. The commercial unit booked 300 net orders in the third quarter, including from Turkish Airlines, Ethiopian Airlines and Lufthansa, and its backlog reached more than 6,300 airplanes valued at a record $612 billion. Total company backlog was a record $745 billion, as FinanceInTime reported at the time.

At the third quarter's pace of 161 deliveries, the commercial backlog equals about 9.8 years of output (computed from the quarterly figure times four). That is a simple ratio, not a delivery schedule, and it would shrink as production rates rise.

The Federal Aviation Administration certified the 737-10, the largest MAX model, on October 20, Boeing said, "clearing the way for Boeing [NYSE: BA] to begin delivering the airplane in the coming months." The company said more than 30 customers have ordered 1,555 of the model, "or more than 30 percent of the 737 MAX program's current order book."

Two weeks later, the lessor Avolon finalized a purchase of 140 737-10s, which Boeing called "a record 737 MAX order by a lessor," according to a joint announcement on November 4. Lessors have placed firm orders for more than 230 737-10s in 2026, "five times more than the lessor backlog for the largest 737 MAX variant at the end of 2025," Boeing said.

Cash is improving, but slowly

The financial position explains why the company is managing labor costs while orders rise. Boeing generated $1.50 billion of operating cash flow and $464 million of free cash flow, a non-GAAP measure, in the third quarter, but free cash flow for the first nine months was negative $359 million. The operating cash flow included Department of Justice settlement payments of about $0.7 billion, the company said.

Consolidated debt was $45.9 billion at the end of the quarter, unchanged from the second quarter, against cash and marketable securities of $20.7 billion. Boeing said its $10.0 billion of credit facilities remained undrawn.

Kelly Ortberg, president and chief executive officer, said in the results release that recent milestones "are important steps as we continue building on our progress," adding: "But we are not done."

What the documents do not settle

The sources do not say how many of the planned cuts fall in Seattle-area factories, engineering or support functions, or whether they change the timing of the move to 47 737s a month. Boeing's releases give no date for reaching that rate. The data also does not show whether the cuts follow a lower production plan for 2027 or only a slower path to the same plan; Pope's quoted words, "reducing aircraft output," leave both readings open.

A staffing cut that buys time, not output

FinanceInTime's view is that the cuts are a cost answer to a production problem, and that the measure to watch is the monthly 737 rate rather than the headcount. A unit losing $697 million a quarter, with a backlog of almost 10 years at the current pace, is paying for staff sized for a rate it has not yet reached. Trimming that cost while the line stabilizes is defensible capital discipline.

The threat is that a company with 1,555 737-10 orders waiting cannot deliver them without the workforce to build them, and that cuts made for a slower schedule become an obstacle when the rate does rise. Lessors such as Avolon are betting on deliveries into the next decade; repeated delays would test the pricing Boeing can hold on later orders. The opportunity is that each step toward 47 a month spreads fixed costs over more aircraft, which the third quarter's 1.5% company operating margin needs.

Our forecast, conditional on no new certification or quality setback, is that commercial margins stay negative through the next two quarters while free cash flow improves slowly. We would change this view if Boeing gives a dated target for 47 a month, or if 737 deliveries in the fourth quarter fall below the third quarter's 124.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.