Boeing has announced that they will be cutting their workforce by 10% and reducing production of the 787 Dreamliner due to the on-going Covid-19 pandemic.
The announcement came in a letter to employees from Boeing’s President and CEO Dave Calhoun who says the aviation industry is facing unexpected challenges, with the pandemic affecting airline customer demand, production continuity and supply chain stability.
“The demand for commercial airline travel has fallen off a cliff, with U.S. passenger volumes down more than 95% compared to last year. Globally, commercial airline revenue is expected to drop by $314 billion this year,” said Calhoun. “As a result, airlines are delaying purchases for new jets, putting the brakes on delivery schedules and deferring elective maintenance. We’re also seeing a dramatic impact on our commercial services business, as grounded airline fleets decrease the demand for our offerings.”
Calhoun says that the company will be reducing operating costs and discretionary spending, suspending dividend payments, extending existing pause on stock buybacks, reducing or deferring R&D and capital expenditures, and accelerating some progress payment receipts with help from defense customers. He and Boeing’s chairman will also not be taking a salary for the year. It’s hoped the move will relieve pressure on near-tern cash flow.
“The aviation industry will take years to return to the levels of traffic we saw just a few months ago,” said Calhoun. “We have to prepare for that. In today’s first-quarter earnings disclosure, we will be announcing a number of steps we’re taking to meet that new reality.”
The company will also be making the following reductions to commercial airplane production rates in response to the pandemic:
• 737 MAX production will resume at low rates in 2020, gradually increasing to 31 planes per month during 2021, with gradual increases to correspond to market demand
• Reduction of the 787 production rate to 10 per month in 2020 and to 7 per month by 2022, continuing to evaluate the rate after that
• Reduction of the combined 777 / 777X production rate to 3 per month in 2021 and take a measured approach to the 777X rate ramp
• The 767 and 747 production rates will remain unchanged
Calhoun says the sharp reductions in demand for the company’s products for the next several years means they must reduce their workforce by roughly 10%. The reductions will made through a combination of voluntary layoffs, natural turnover and involuntary layoffs.
“That is 10 percent in total for the enterprise. We’ll have to make even deeper reductions in areas that are most exposed to the condition of our commercial customers — more than 15% across our commercial airplanes and services businesses, as well as our corporate functions,” said Calhoun.
Under voluntary layoffs, eligible departing employees will be provided with a pay and benefits package. Those who are involuntarily laid off will still receive severance pay, COBRA health care coverage and career transition services.
