BA Boeing Co

By Doug Cameron and Andrew Tangel 

Boeing Co. said it would cut production of commercial jets even further and continue to shrink its workforce as the coronavirus pandemic deepens its toll on the global aviation industry.

The U.S. aerospace giant lost $2.4 billion in the second quarter and said it may consolidate some jet assembly to save money and prepare for a multiyear slowdown in aircraft deliveries.

Boeing had already planned to cut 10% of its workforce and plans outlined Wednesday to shrink it further will likely ripple through the broader U.S. economy, triggering thousands of job cuts among suppliers and denting the trade balance as aircraft exports dry up.

The worse-than-expected performance in the latest quarter reflects the impact of the pandemic as well as the prolonged grounding of the 737 MAX aircraft following two fatal crashes.

The company booked another $2.5 billion in charges to cover airline compensation for the MAX, severance payments, abnormal production costs and asset write-offs.

The per-share loss of $4.79 excluding pension costs and other items compared with a $5.82 deficit a year earlier and the $2.57 consensus among analysts polled by FactSet.

Revenue fell 25% to $11.8 billion. Though sales at its defense arm were flat from a year ago, they ran four times higher than the jetliner business and provided a relative bright spot.

Boeing shares opened 1% higher and later turned negative as it ended the quarter with more than $30 billion in liquidity, though its debt now tops $60 billion.

The company has restarted limited MAX production, but pushed back an increase to 31 planes a month until 2022. Boeing is also trimming monthly output of its 787 Dreamliner to six and its 777 wide-body to just two. The revamped 777X plane that Boeing is relying on to generate cash won't arrive until 2022, two years behind schedule, and Boeing said it would stop making its 747 jumbo in 2022.

Boeing has already announced plans to shrink its 160,000 strong workforce, and plans further reductions, according to a person familiar with the plans. It also wants to reduce jetliner production as fast as possible, but is mindful of the impact on its broader supply chain, according to the person. It didn't specify how many more jobs would have to be shed.

Boeing Chief Executive David Calhoun said the plane maker is studying whether to consolidate 787 Dreamliner production, rather than making the jets at two factories in Everett, Wash., and North Charleston, S.C. He said Boeing doesn't expect air-travel demand to return to pre-pandemic levels for about three years.

"These past few months have been unlike anything we've seen," Mr. Calhoun said in a companywide message Wednesday morning. "The reality is the pandemic's impact on the aviation sector continues to be severe."

Global airline traffic is forecast to fall more than 60% this year because of travel restrictions and weakening economic growth, and take until 2024 to recover to its 2019 level after a decade of rapid growth, according to the International Air Transport Association, a trade group.

Airlines and leasing companies have responded by canceling and deferring aircraft orders, forcing Boeing and rival Airbus SE to reduce production, prompting suppliers to follow suit and cut thousands of jobs.

The slump in deliveries to just 20 jets in the latest quarter worsens Boeing's cash drain. The company burned through $5.6 billion in cash during the June quarter. Boeing raised $25 billion in debt during the quarter and had $61.4 billion in debt at the end of June.

The latest quarter reflects the mounting turmoil on commercial aviation from the coronavirus pandemic. As infections in its workforce mounted in the spring and suppliers faced their own constraints, the company halted various production operations.

In April, Boeing announced it would ramp up MAX production to 31 jets a month next year, almost half the level before that aircraft's grounding in March 2019 following the crashes that took 346 lives.

As the MAX's production ramp-up faces delays, so do the aircraft's expected regulatory approvals to resume commercial service. Boeing said it now expects to resume MAX deliveries in the fourth quarter, rather than its previous estimate of the third quarter.

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

(END) Dow Jones Newswires

July 29, 2020 10:44 ET (14:44 GMT)

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