Airplane Makers Are Downbeat on Revival -- WSJ
April 28 2020 - 3:02AM
Dow Jones News
By Andrew Tangel and Doug Cameron
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 28, 2020).
Air traffic may not bounce back for two or three years, Boeing
Co. Chief Executive David Calhoun said, outlining the tough outlook
for global aviation to the plane maker's shareholders on
Monday.
"The health crisis is unlike anything we have ever experienced,"
Mr. Calhoun said at the annual meeting. "It will be years before
this returns to pre-pandemic levels."
Mr. Calhoun laid out the coronavirus pandemic's toll on the
industry: Global airline revenues are set to drop by $314 billion
this year. In the U.S., more than 2,800 planes are idled. Passenger
demand is down 95% from last year.
"We are in an unpredictable and fast-changing environment, and
it is difficult to estimate when the situation will stabilize," he
added. "But when it does, the commercial market will be smaller and
our customers' needs will be different."
Mr. Calhoun offered few specifics about production cuts or
planned job cuts, leaving more details for Wednesday, when Boeing
reports first-quarter results. Boeing has been weighing production
cuts and layoffs and has recently been considering a plan to cut
its workforce by about 10%.
To save cash, Boeing has suspended its dividend, and Mr. Calhoun
said Monday that it wouldn't resume paying one for some years. The
plane maker will need to borrow again this year, and it will need
to repay that debt over the next three to five years, he said.
The Chicago aerospace giant's customers have been canceling and
deferring plane orders, intensifying financial strains stemming
from the 737 MAX debacle following the global grounding of that
aircraft after two fatal crashes took 346 lives.
Mr. Calhoun's remarks echoed those of Guillaume Faury, CEO of
Airbus SE, who said the European plane maker was bleeding cash and
needed to cut costs and jobs.
"The survival of Airbus is in question if we don't act now," Mr.
Faury said in a letter to employees last week.
Airbus on Monday said it would furlough 3,200 employees at its
wing manufacturing plant in the U.K. Furloughed workers would be
placed on the U.K.'s job retention scheme, which uses public funds
to cover up to 80% of employees' salaries. Airbus said it would
then top that up to as much as 90% of regular pay depending on
salary level. Employees will be furloughed for at least three
weeks, with starting dates staggered through May 15. Only the
company's factory in Broughton, Wales, is affected. That is where
Airbus makes wings for its range of commercial aircraft.
Boeing has been in talks with the U.S. government over
potentially billions of dollars in taxpayer help as it faces the
aviation industry's increasingly bleak outlook.
With demand plummeting for new aircraft during the pandemic,
Boeing last weekend walked away from a $4 billion deal for
Brazilian regional jet maker Embraer SA's commercial arm. Embraer
said Monday it has started arbitration over the failed deal.
Boeing said Monday it would resume production at its North
Charleston, S.C., factory where it builds 787 Dreamliners. The
factory has been halted since April 8 due to the virus outbreak.
The resumption of operations, scheduled to begin Sunday, follows
factory restarts in the Seattle area.
Mr. Calhoun said the pandemic is spurring reflection on how the
plane maker will design airplane cabins in the future, including
how air circulates. "There's going to be a lot of learning in this
process," he said.
Despite the outlook, Mr. Calhoun expressed longer-term optimism
for Boeing, the aviation industry and future of travel. "People
will still want to fly, and they will fly," he said. "I believe we
will return to a robust market. It's a question of how long it
takes."
Boeing's board nominees won a majority of votes in shareholders'
election, despite two influential proxy advisory firms'
recommending votes against some key directors because of their role
in the 737 MAX crisis.
All five Boeing board nominees that survived recommendations
from proxy advisers against renomination faced substantial
opposition. Susan Schwab and Arthur Collins secured backing from
less than 60% of votes cast at Boeing's annual meeting, with
chairman Larry Kellner, Edmund Giambastiani, and Ronald Williams
supported by 65% to 75% of voters.
Boeing shares fell 30 cents Monday to $128.68, while Airbus
shares dropped 2.4% to EUR51.07 in European trading. Both stocks
are down nearly 61% in 2020.
Write to Andrew Tangel at Andrew.Tangel@wsj.com and Doug Cameron
at doug.cameron@wsj.com
(END) Dow Jones Newswires
April 28, 2020 02:47 ET (06:47 GMT)
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