Boeing Cuts Workforce, Production in Response to Coronavirus -- Update
April 29 2020 - 10:50AM
Dow Jones News
By Doug Cameron and Andrew Tangel
Boeing Co. said Wednesday it was slashing plane production and
cutting its workforce, as it reported a second consecutive
quarterly loss and offered the first clear glimpse of the
coronavirus pandemic's mounting financial strain.
The U.S. aerospace giant also offered a grim outlook, with
travel bans and restrictions expected to halve global air travel in
2020, with an uncertain recovery spread out over several years
that's left airlines unwilling or unable to take new planes.
Boeing Chief Executive David Calhoun said in an employee memo:
"The pandemic is also delivering a body blow to our business --
affecting airline customer demand, production continuity and supply
chain stability. The demand for commercial airline travel has
fallen off a cliff."
Boeing, which burned through $4.7 billion in cash in the first
quarter, has been considering applying for federal stimulus help,
but didn't detail what type -- and how much taxpayer aid -- it
might seek. It also has access to an undrawn $9.6 billion revolving
credit facility.
The U.S. aerospace giant Wednesday said it would halve output of
its 787 jetliner to seven a month by 2022 after an initial dip to
10 from 14, and resume 737 MAX output at a low initial rate this
year, rising to 31 a month in 2021. It had planned to produce about
twice as many MAX jets before regulators grounded the aircraft in
March 2019 following two fatal crashes. It is also trimming 777
production.
Rival Airbus SE said earlier this month that it is cutting
jetliner output by a third.
Boeing employed 161,000 staff as of Jan. 1, and plans to cut
that by 10%, including voluntary layoffs and involuntary cuts as
required.
Lower plane deliveries and sales of spares combined with the
impact of temporary factory closures and the continuing impact of
the 737 MAX crisis led to a quarterly loss of $641 million compared
with a profit of $2.15 billion a year earlier.
The $1.70 loss per share compared with a year-ago profit of
$3.16 and the $1.31 consensus among analysts. Sales fell to $16.9
billion from $22.9 billion.
The company booked another $2.3 billion in charges during the
quarter, with the production halt on the 737 MAX line raising
additional expenses for the jet by a quarter to $5 billion. The
KC-46A military tanker accumulated another $827 million in charges.
Boeing's Covid-related production halts generated $137 million in
additional costs, while fixing earlier 737 jets amounted to a $336
million charge. It didn't take a charge for cutting 787 output.
The company ended the quarter with $15.5 billion in cash.
Boeing previously suspended its dividend, canceled a planned
deal with Brazilian plane maker Embraer SA that would have cost
$4.2 billion and drew down a $13.8 billion loan.
Write to Doug Cameron at doug.cameron@wsj.com and Andrew Tangel
at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
April 29, 2020 10:35 ET (14:35 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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