Boeing Plans Deeper Job and Production Cuts
July 29 2020 - 8:45AM
Dow Jones News
By Doug Cameron and Andrew Tangel
Boeing Co. said it would cut production of commercial jets and
shrink its workforce further as the coronavirus pandemic deepens
its toll on the global aviation industry.
The U.S. aerospace giant said Wednesday that it lost $2.4
billion in the second quarter, reflecting the impact of the
pandemic as well as the prolonged grounding of the 737 MAX aircraft
following two fatal crashes. This compared with a loss of $2.9
billion in the same period last year.
The per-share loss of $4.20 compared with $5.03 a year earlier
and the $2.57 consensus among analysts polled by FactSet. Revenue
fell 25% to $11.8 billion.
Boeing shares rose 2% in pre-market trade, with the drain on its
cash balance less than many analysts expected.
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 new 777X plane won't arrive until 2022,
two years behind schedule.
Boeing has already announced plans to shed 10% of 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.
"Regretfully, the prolonged impact of Covid-19 causing further
reductions in our production rates and lower demand for commercial
services means we'll have to further assess the size of our
workforce," Boeing Chief Executive David Calhoun said in a message
to Boeing employees.
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 second 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,
including its factories in Everett, Wash., and North Charleston,
S.C.
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.
Back then, it was planning to scale back 787 Dreamliner
production to 10 from 14 a month this year, and then to seven a
month by next year. Boeing also planned to trim production of
wide-body 777s to three a month from five.
Write to Doug Cameron at doug.cameron@wsj.com and Andrew Tangel
at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
July 29, 2020 08:30 ET (12:30 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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