Boeing Cutting More Jobs in Response to Pandemic -- Update
October 28 2020 - 3:08PM
Dow Jones News
By Doug Cameron
Boeing Co. said it will cut more jobs and review jetliner
production rates in an effort to stop bleeding cash as the
coronavirus pandemic roils global air travel.
Faced with a pileup of undelivered aircraft, the company said it
would review its commercial aircraft production levels as airlines
are either unable or unwilling to accept its newly produced jets
amid a prolonged slump in passenger demand for flights.
Executives said Wednesday Boeing wouldn't likely generate cash
in 2021, when the plane maker expects to hand over half of its some
450 undelivered 737 MAX jets that have been grounded for nearly two
years.
The company expects to reduce its headcount by another 11,000,
including 7,000 layoffs, on top of almost 20,000 already announced
and end next year with around 130,000 employees, about 40% less
than when it merged with McDonnell Douglas in 1997.
The collapse in airline traffic and reduced aircraft production
have already cost the U.S. aviation industry around 100,000 jobs so
far this year and another 220,000 are at risk, according to the
Aerospace Industries Association, a trade group.
"The reality is that our industry as a whole will simply build
less in the coming years," said Boeing Chief Financial Officer Greg
Smith on an investor call.
Boeing said it still expects to gradually increase MAX
production through next year. It will also reduce output of the 787
Dreamliner when it moves all assembly to South Carolina. Deliveries
of the aircraft would remain relatively slow in coming months due
to inspections following previously disclosed quality-control
lapses, Mr. Smith said.
However, Boeing executives said it could reduce production
further if airlines are unable to take delivery because of a lack
of demand or financing. Wide-body planes like the 787 are under
particular scrutiny because of the collapse in long-haul
international flying.
The International Air Transport Association, a trade group, this
week cut its revenue outlook for the global airline industry in
2021 by a quarter from its previous guide in August as rising
coronavirus cases and quarantines restricted travel.
"We will monitor as we prudently manage supply and demand," said
Boeing Chief Executive David Calhoun on the investor call.
The existing production cuts and pandemic-driven restrictions
are forecast to limit Boeing's jetliner deliveries to airlines and
leasing companies to 170 this year compared with about 500 at rival
Airbus SE, according to analysts. Boeing handed over 28 planes to
customers in the September quarter compared with 62 a year earlier.
It has become more reliant on its defense business, where sales
were double those of the commercial arm in the latest quarter.
Boeing lost $466 million in the September quarter as overall
sales fell 29% from a year ago and the company used $4.8 billion in
cash during the quarter, further evidence of the mounting financial
cost from the MAX crisis and fallout from the pandemic. Liquidity
declined to $27 billion and debt remained around $61 billion.
Boeing shares were recently down 3%, off earlier lows.
The per share loss of 79 cents in the quarter compared with a
$2.05 profit a year earlier. The adjusted loss of $1.39 was ahead
of the $2.35 consensus among analysts polled by FactSet, helped by
a lower-than-expected tax charge.
Boeing's commercial jetliner arm reported a loss of $1.4 billion
in the quarter as sales fell 56%. Rival Airbus reports earnings on
Oct. 29, and has said it is planning to reverse some of its own
production cuts next summer in anticipation of any future rebound
in air travel.
The defense business produced a profit of $628 million, down 2%
from a year ago, but executives said they were watching a potential
slowdown. Lockheed Martin Corp. and Northrop Grumman Corp. last
week forecast low double-digit sales growth next year, reflecting
expectations for a flat or declining Pentagon spending over the
next several years because of federal budget pressures.
Mr. Calhoun said Boeing wouldn't strangle investment at the
defense business, which he expected to return to growth as
development work on programs such as the new presidential aircraft
fleet moved into the more profitable production phase.
Andrew Tangel contributed to this article.
Write to Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
October 28, 2020 14:53 ET (18:53 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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