Boeing announced it will cut an additional 7,000 jobs as its losses continue to mount following a plunge in revenue.
The aircraft maker had already announced was reducing staff by 19,000 jobs earlier this year, through a combination of voluntary and involuntary layoffs. It said Wednesday it expects to get down to about 130,000 jobs by the end of 2021, which would mean an additional 7,000 job cuts, in addition to the natural attrition at the company throughout the year. In August the company had warned employees there would be additional job cuts coming, as it offered a new round of buyouts.
Boeing did not immediately identify where the job cuts would occur. And it’s not clear if this will be the end of the cuts.
The company posted a loss of $754 million, excluding special items, in the most recent quarter as revenue fell $5.8 billion, or 29%. Airlines have put the brakes on new plane deliveries and are canceling orders because of the sharp drop in air travel caused by the pandemic. Boeing gets most of its revenue from an aircraft sale at the time of delivery.
“The global pandemic continued to add pressure to our business this quarter, and we’re aligning to this new reality,” CEO Dave Calhoun said on the earnings call.
Calhoun predicted that global air traffic will not return to 2019 levels for at least three more years, and it will take several years for it to catch up with the growth levels that had been forecast before the pandemic. The pandemic’s impact on aircraft sales will last for many years to come, he said, adding that Boeing’s 10-year commercial airplane market outlook is approximately 11% lower than what was assumed a year ago.
“From a 20-year perspective, we still see the impact of Covid, but to a lesser extent,” he said.
Shares of Boeing (BA), a Dow component, were down about 2% in early afternoon trading Wednesday.
While Boeing’s third-quarter loss is far narrower than its $3.3 billion and $1.7 billion losses in the second and first quarters, respectively, it’s clear the company is under increasing stress from the Covid-19 pandemic’s hit to airlines. It burned through $4.8 billion in the quarter, double its cash burn in the second quarter.
Boeing has taken on more than $37 billion in additional debt to weather this downturn. Even with the increasing cash burn, the company had $10.6 billion in cash on hand at the end of the quarter — $1.1 billion more than at the start of the year.
The company announced Wednesday it will now use Boeing stock rather than cash to fund the company’s contribution to employees’ 401(k) plans for the foreseeable future, which is designed to save it $1 billion in cash.
Earlier this month Boeing decided to halt production of the 787 Dreamliner at a unionized plant in Washington state and consolidate production at a non-union plant in South Carolina starting in 2021. It also plans to stop production of the 747, which is now being built only as a freighter, in 2022.
Boeing is slowing production of all models of its commercial jets in response to the airlines’ reduced demand for planes. That slower production rate is expected to reach $5 billion in increased costs for Boeing in 2020 and 2021.
In one spot of good news, Boeing said it believes it will soon win regulators’ approval for the 737 Max to carry passengers once again. Calhoun said it should be able to begin deliveries of the Max jets again before the end of the year. At the beginning of the year the company had expected it would have that approval by the middle of 2020.
But Calhoun said that of the 450 of the Max jets it built during the grounding, a certain number are no longer wanted by the original customers and they will have to be reconfigured for new customers. So Boeing expects to deliver only about half of those already completed jets by the end of 2021, and the other half in 2022.
The plane has been grounded globally since March 2019, following two crashes that killed a total of 346 people. The grounding has cost Boeing about $2 billion in compensation to customers as well as increased production costs.
Only two of Boeing’s customers — American Airlines (AAL) and Air Canada (ACDVF) — plan to fly the 737 Max again before the end of the year, with others saying they’re looking at flights sometime in 2021. Southwest (LUV), which has more Max jets in its fleet than any other airline, said it doesn’t plan to fly the Max again until the second quarter of next year.