Boeing will cut its staff by 10% - more than 10,000 jobs - and slash its production of its main commercial planes, including the 787 and 777, after it reports $641 million first-quarter loss
Boeing announced sweeping cost-cutting measures Wednesday after reporting a first-quarter loss of $641 million following the hit to the airline business from the coronavirus pandemic.
The aerospace giant plans to reduce its workforce by 10 per cent through a combination of voluntary and involuntary layoffs and will slash production of its main commercial planes, including the 787 and 777, Chief Executive David Calhoun said in a message to employees that accompanied an earnings release.
'The aviation industry will take years to return to the levels of traffic we saw just a few months ago,' Calhoun said. 'We have to prepare for that.'
Calhoun said the job cuts would be deeper - more than 15 per cent - in commercial airplanes and services, as compared with defense and space systems, where the business has been more stable.
The quarterly loss of $641million compared to profits of $2.1billion in the year-ago period. Revenues fell 26.2 per cent to $16.9billion. Total debt at the end of the quarter was $38.9billion, up from $27.3billion at the end of December
Boeing shares jumped 4.6 per cent to $137.04 in pre-market trading
Calhoun said the belt-tightening was needed to maintain adequate liquidity at a time its revenues are depressed, adding that the company is 'exploring potential government funding options' in the wake of COVID-19.
Boeing has previously called for $60billion in government support for the US aerospace industry.
Federal relief legislation includes $17billion aimed at Boeing. Calhoun has previously balked at the idea of the US taking a stake in Boeing.
'We are in an unpredictable and fast-changing environment, and it is difficult to estimate when the situation will stabilize.
'But when it does, the commercial market will be smaller and our customers' needs will be different. We know we are going to have to borrow more money in the next six months in order to get through.'
The loss reflected 'abnormal production costs' connected to the temporary suspension of Puget Sound manufacturing operations due to COVID-19 and due to the suspension of production of the 737 MAX, which remains grounded following two deadly crashes.
Boeing said the pandemic crisis has hit demand for new planes and services, with airlines delaying purchases of jets, slowing delivery schedules and deferring elective maintenance.
It will cut production of the 787 from 14 per month to 10 per month in 2020 and gradually to seven per month by 2022
Boeing also will trim output on the 777 and lower its targets for the 737 MAX.
'We have done a tremendous job of increasing our production rates and services offerings in recent years,' Calhoun said.
'But the sharp reduction in our demand for our products and services over the next several years simply won't support the higher levels of output.'
Boeing shares jumped 4.6 per cent to $137.04 in pre-market trading
Boeing was in trouble before the coronavirus outbreak with its best-selling jet, the 737 Max, grounded after two crashes killed 346 people.
The grounding of the Max added billions in costs and cut deeply into revenue last year, leading to Boeing’s first money-losing year in two decades.
The company faces criminal and civil investigations and a flurry of lawsuits by families of the people killed in the crashes.
The outbreak has added to Boeing's troubles as airlines delay or cancel plans to buy new jets.
It also caused Boeing to shut plants for several weeks, although it has reopened in the Seattle area and will resume production of 787 aircraft at its facilities in South Carolina on Sunday night, with most of the staff returning by May 4.
Operations at South Carolina were temporarily suspended on April 8 following the COVID-19 pandemic.
Boeing said it will institute a series of safeguards including signage to create physical distance and face coverings for employees.
Over the weekend, Boeing terminated a deal with Brazilian aircraft maker Embraer SA, which analysts said will help Boeing conserve cash but weaken its position in the market of building smaller passenger jets. .
