BA Boeing Co

By Doug Cameron and Andrew Tangel 

Boeing Co. outlined a survival plan including thousands of job cuts and the raising of new funds, as the largest U.S. exporter reels from the pandemic and the near-collapse of passenger air travel.

The aerospace giant said Wednesday it plans to take on more debt and is evaluating federal loans in order to support a supply chain of about 17,000 companies. It is also planning further cuts to once-booming jetliner production after airlines parked more than half the global fleet and started canceling orders because of uncertainty over when and how air travel will resume.

"We will be a smaller company for a while," Chief Executive David Calhoun told investors Wednesday as Boeing reported its second consecutive quarterly loss.

Boeing and rival Airbus SE are being forced to reverse course as the pandemic ended a decadelong surge in air travel driven by the rise of low-cost carriers and growth in emerging markets. The upswing saw the two companies amass orders for more than 13,000 jets, half the existing global fleet.

After burning through $4.7 billion in cash during the first quarter, Boeing said it is considering applying for stimulus help, as well as borrowing more from private lenders. The company didn't specify what type or how much funding it might seek in coming weeks.

Boeing shares climbed more than 10% Wednesday as it detailed plans to reduce production of wide-body jets but also resume output of the smaller 737 MAX aircraft, which has been grounded for more than a year following two fatal accidents. Shares in many suppliers also soared.

"We believe this industry will recover," Mr. Calhoun said, as governments step in to support airlines and the aviation industry.

Airlines expect passenger traffic to shrink by half this year but are starting to plan for a possible pickup in travel later this year. Domestic markets are expected to be the first to re-emerge, while the international routes that typically use larger planes could take years to reach pre-pandemic levels.

Boeing ended the first quarter with $15.5 billion in cash and has yet to tap a $9.6 billion revolving credit facility. With the pandemic dimming its prospects, the company already has suspended its dividend and canceled a planned deal with Brazilian plane maker Embraer SA that would have cost $4.2 billion. It also drew down a $13.8 billion bank loan.

Boeing, which employed 161,000 staff as of Jan. 1, said it plans to reduce head count by 10% this year, including what Mr. Calhoun said would likely be involuntary layoffs. The company, which is also a major defense contractor, said most of the cuts would come from its commercial airplane and services arms. Mr. Calhoun said Boeing wouldn't know for several weeks how many employees would accept buyout packages. He said it is also weighing furloughs, primarily in its business that provides services to airlines.

The planned workforce reductions aren't as severe as those Boeing undertook following the Sept. 11, 2001, terrorist attacks. After the attacks resulted in a steep decline for U.S. air travel, Boeing moved to lay off as many as 30,000 workers along with steep cuts in production. Mr. Calhoun has said he wants to protect Boeing's workforce for an eventual recovery.

The Chicago-based company said it will trim output of its 777 and 787 widebody jetliners, with production of the latter halving to seven planes a month by 2022.

Production of the 737 MAX, which was suspended in January, is set to resume this quarter at a low rate, rising to 31 a month next year. Boeing had planned to produce about twice as many MAX jets before regulators grounded the aircraft in March 2019. The company is planning to resume MAX deliveries from the third quarter, though the Federal Aviation Administration has said it has no timeline for approving safety changes to the MAX that the agency deems necessary.

European rival Airbus has said it plans to cut its jetliner output by a third.

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 loss of $641 million for Boeing's first quarter. Sales fell to $16.9 billion from $22.9 billion a year earlier.

The loss reflected $2.3 billion in charges, including for plant shutdowns affecting the 737 MAX and other models. The company also booked another $827 million in costs for its KC-46A military tanker contract and $336 million to fix earlier 737 models.

Boeing said it provided around $700 million in compensation to 737 MAX customers during the quarter, mostly in cash. Chief Financial Officer Greg Smith said its estimate of the total payout to customers was unchanged.

The pandemic has complicated plans to develop new aircraft. Mr. Calhoun said Boeing will have to wait for a market recovery before designing aircraft tailored to airlines' needs: "It's going to take us a while to sort that out."

Write to Doug Cameron at doug.cameron@wsj.com and Andrew Tangel at Andrew.Tangel@wsj.com

(END) Dow Jones Newswires

April 29, 2020 16:00 ET (20:00 GMT)

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