BA Boeing Co

By Doug Cameron and Andrew Tangel 

Boeing Co. on Wednesday outlined plans to slash more production and jobs and look for other ways to conserve cash as the coronavirus pandemic deepens its toll on the global aviation industry.

The U.S. plane maker lost $2.4 billion in the second quarter and said it may consolidate some jet assembly among its three main factories to save money and prepare for a multiyear slowdown in aircraft deliveries.

Boeing's plans to become smaller will leave the Chicago-based aerospace giant increasingly reliant on its defense business for cash and likely ripple through its vast supplier network, their workforces and the broader U.S. economy.

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.

Boeing executives said they expected the pandemic's fallout to continue buffeting the manufacturer through the end of the year, setting the stage for an eventual recovery to begin taking shape in 2021 if vaccines help control the virus and travel demand rebounds. They expect travel demand to bounce back in about three years.

"Our industry and our company are weathering challenges like none we have ever experienced in our lifetimes, and many of those challenges are still unfolding," Chief Executive David Calhoun said in a call with analysts Wednesday.

Boeing delivered so few jets in the second quarter that it has for now lost its mantle as the largest U.S. plane maker to General Dynamics Corp., whose Gulfstream arm handed over 32 of its high-end private jets to customers. Boeing managed to deliver 20 jets in the quarter.

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

Boeing's 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. Its results were weighed down by $2.5 billion in charges to cover airline compensation for the MAX, severance payments, abnormal production costs and asset write-offs.

Boeing shares fell 3% in Wednesday afternoon trading. It ended the quarter with more than $30 billion in liquidity, though its debt now tops $60 billion.

As Boeing wades through requests from its customers to defer deliveries or cancel orders for new aircraft, executives said they were focusing on moving finished aircraft that airlines are increasingly reluctant to take or unable to afford.

Future production increases would depend on how quickly Boeing can move its growing inventory of finished airplanes, sometimes to new buyers they weren't originally designed for.

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 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 said it would further reduce its head count by an unspecified number beyond the 19,000 cuts it currently expects. The company previously announced plans to shrink its 160,000-strong workforce by about 10%, with most of those layoffs coming from its beleaguered commercial arm.

Chief Financial Officer Greg Smith said the company would reduce jetliner production faster, but took into consideration the stability of its supply chain and production operations.

Mr. 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 it was too soon to predict what any changes could mean for those sites.

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. Airbus is due to report second-quarter earnings on Thursday.

The slump in deliveries to 20 jets in the latest quarter worsened 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. Mr. Smith said Boeing expects to resume generating cash next year.

The latest quarter reflects temporary shutdowns of various factories as infections among Boeing workers mounted in the spring and suppliers faced their own constraints.

Boeing's office employees will likely continue working from home until early next year, longer than previously planned. "We're going much more slowly," Mr. Calhoun told reporters Wednesday.

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.

Mr. Calhoun said the pandemic has resulted in logistical hurdles that have further delayed the aircraft's certification.

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

(END) Dow Jones Newswires

July 29, 2020 16:12 ET (20:12 GMT)

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