The US aircraft manufacturer Boeing is to shed 10% of its 160,000 workforce by the end of this year and greatly reduce the production of its aircraft range into 2022, in what the company describes as an entirely new market created by COVID-19.
At the company’s first-quarter earnings call on Wednesday, Boeing CEO David Calhoun detailed the adjustments to production runs that would be coming into effect. Plans for the 737 MAX, which he estimated will resume in the third quarter, will accelerate even slower than originally planned following the jet’s 18-month grounding. In a revised upbeat earlier plan to increase MAX production from 57 a month to 63, Boeing now sees this rate peaking at only 31 per month well into 2022, and will only rise if the market demand is there in the future.
A letter sent to the company’s employees last week, Calhoun called the pandemic “a body blow” to the business, created by a reduction in passenger volumes of more than 95% compared to last year’s figures and an expected $314 billion fall in airline revenue in 2020. He surmised that a recovery from the COVID-19 crisis to 2019 levels would take up to three years and that it would take “a few years beyond that” for the industry to return to long-term profitability.
“As a result, airlines are delaying purchases for new jets, putting the brakes on delivery schedules, and deferring elective maintenance,” said Calhoun. “We’re also seeing a dramatic impact on our commercial services business, as grounded airline fleets decrease the demand for our offerings. This is all putting pressure on our cash flow.”
According to AINonline, Boeing saw this year’s first-quarter cash flow turn negative in the amount of $4.3 billion compared with positive cash flow for the same period in 2019 of $2.8 billion. Now holding some $15 billion in cash and $5 billion in short-term debt, the company recently allowed the deadline for a $4.2 billion purchase of Embraer’s commercial aircraft business to lapse. Although Boeing blamed the collapse of the negotiations on the Brazilian airframer’s failure to meet certain conditions in the master transaction agreement.