Boeing Co. (NYSE: BA) is expected to announce deep job cuts in the Seattle area by the end of the week.
Executives from the aerospace company met with officials from the Society of Professional Engineering Employees in Aerospace and notified the union that layoff notices will be issued Friday, according to news reports.
Boeing told the union, which represents 18,000 engineers and technical workers in the Puget Sound area, to expect layoffs of 15% to 20% of its members.
The workforce reductions are part of the 16,100 job cuts worldwide that chief executive Dave Calhoun announced after the company reported first-quarter financial results on April 29.
Last week, Boeing laid off 400 workers in Manitoba, Canada. The cuts amounted to 25% of Boeing’s 1,600 workers at two plants in Winnipeg that produce parts for commercial airplanes, CBC News reported.
In early May, Boeing Australia said it would lay off 230 workers at its manufacturing plant in Melbourne, which employs about 1,100 people and produces wing parts and other components for Boeing 787, 777 and 737 aircraft, The Sydney Morning Herald said.
Airlines and Aerospace Industry Are Reeling
The workforce reductions come at a time when the airline and aerospace industries are reeling because of the economic effects of the coronavirus pandemic. The major U.S. commercial airlines have grounded about half of their fleets as the number of airline customers has dropped precipitously.
Earlier this month, Calhoun said in an interview with the “Today” show that the airline industry was in real peril as air travel has plummeted.
“The threat to the airline industry is grave,” Calhoun said. “There’s no question about it. And apocalyptic does actually accurately describe the moment.”
In addition to cutting flights and mothballing aircraft, airlines are delaying delivery on passenger jets that were already in the pipeline.
Turkish Airlines, which halted nearly all of its flights because of the pandemic, said Wednesday that it may delay delivery of some Boeing and AirBus planes it has on order. Chairman Ilker Ayci said in an interview with Turkey’s Hurriyet newspaper that the carrier is looking to resume domestic flights on June 4 and some international flights on June 10.
Ayci said his airline had received about half of its order for 25 Boeing 787-9 planes and that delivery of the rest could be delayed.
Earlier this month, Australian airline Qantas International said that it would not take delivery of any new planes from Boeing or its European rival Airbus in the near future.
Qatar Airways said this month that it was suspending the delivery of new jets from Boeing and Airbus until post-COVID-19 travel demand returns to normal. The airline’s chief executive, Akbar Al Baker, said he does not expect that to be until 2023.
Weighed Down by 737 MAX
Adding to the pressure on Boeing is the 737 MAX. Two fatal crashes in Indonesia and Ethiopia killed 346 people and led to a global grounding of Boeing’s best-selling plane. The company has not delivered a new 737 Max since March of 2019.
Boeing has more than 400 undelivered 737 Max jets parked around the country. The company has restarted its production line for the aircraft, but as of late April, some 250 orders for the single-aisle plane had been canceled. The order backlog remains above 4,000, but clearing out the undelivered inventory as the production line comes back online will take at least a couple of years.
United Airlines has indicated that it will not take deliveries of the 737 MAX for now. And Southwest Airlines, which has made the largest order for the 737 MAX, has said it is keeping its options open on whether to take delivery of the aircraft.
Calhoun has said he remains sure that the 737 Max will be an important part of the company’s future.
“We made a bad assumption, with respect to the design envelope for that airplane, at that moment in time, under that condition,” Calhoun said. “Our assumption about how a pilot would react in a very tense, difficult moment was wrong. Simple as that.
“But I do believe that has been fixed. I also believe in the culture at Boeing. I believe — actually, all of our employees believe — deeply in safety. And we have taken a magnifying glass to everything we do, everything, so that we don’t ever allow for something like that to happen in the future.”
Calhoun added that he has full confidence in the 737 Max. “The certification work, the FAA’s work, has been as thorough as anything I’ve ever seen,” he said. “We’ve worked every scenario we can possibly work into the testing programs. And it does exceedingly well.”
Avoided Federal Bailout
Boeing is projecting that it will take three years for the airline and aerospace industries to recover from the pandemic. “We will slowly crawl back to the traffic levels that we had in 2019,” Calhoun said. “And then it will take another two years to get back on the growth curve that the industry has enjoyed for almost two straight decades.”
The company has suspended dividends and is issuing $25 billion in bonds to weather the pandemic instead of taking a bailout from the U.S. government. “We’ll prioritize the payback of our debt instruments over anything with respect to return to shareholders, until we get back to the same kind of balance sheet we add before the virus, and before the MAX,” Calhoun said.
In stock market trading Wednesday, Boeing shares were holding steady near $145 at midday. The stock’s 52-week range is $89.00 to $391.00, and the 12-month consensus price target is $157.00.
Year to date, Boeing’s stock price is down by more than 55%, and it is underperforming the S&P 500.
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