Boeing is planning additional dismissals and voluntary departures to shrink its workforce nearly 19 per cent by the end of next year as the pandemic blunts demand for aeroplanes.
The Chicago company has already said it will cut 19,000 jobs by the end of 2020, the bulk of them in the commercial planes division. Now it has announced that it will cut another 7,000 positions, both voluntary and involuntary. Combined with natural attrition, the aircraft maker expects its workforce to go from 160,000 at the start of 2020 to 130,000 by the end of 2021.
Boeing said in the first quarter that it would reduce its workforce by 10 per cent, then said last quarter that greater cuts were coming.
“The deep impacts of Covid-19 on the commercial aviation market and our business are reflected in lower revenue, earnings and cash flow compared to this time last year,” said David Calhoun, chief executive, in a memo to employees.
“As we align to market realities, our business units and functions are carefully making staffing decisions to prioritise natural attrition and stability in order to limit the impact on our people and our company.”
Boeing reported a net loss of $466m for the third quarter compared with a profit of $1.2bn for the same period last year. Revenue fell 29 per cent to $14bn. Free cash — an important metric for the company that subtracts capital expenditures from operating cash flow — was a $5.1bn outflow, compared with a $2.9bn outflow in the third quarter of 2019.
The company said revenue fell because of lower deliveries for commercial jets in the third quarter, as well as a drop in volume for its service business. Boeing delivered 28 planes in the third quarter, compared with 62 a year earlier. As airlines fly less, they require less maintenance, and revenue from Boeing’s service business fell 21 per cent from the third quarter of 2019 to $3.7bn.
Boeing has been dealing with Covid-19 for seven months and the crisis over its 737 Max plane for 19 months. Demand for air travel collapsed as governments issued stay-at-home orders to combat the pandemic, and it has only recovered so far to a fraction of 2019 levels.
With demand down, airlines are parking portions of their fleets and delaying, or outright cancelling, deliveries of new aircraft. Boeing cut its forecast for aircraft demand over the next decade by 11 per cent this month.
Meanwhile, the 737 Max remains grounded following two fatal crashes, although regulators in the US and Europe have signalled that in November they will allow the jet to fly again.
American Airlines told investors this month that it had deferred 18 Max deliveries for two years. Boeing reported 983 orders this year in which the customer either cancelled or may have lacked the financial soundness to complete the sale. Almost all were Maxes.
The two Max crashes that triggered the safety crisis killed a combined 346 people. A report released last month by a US House of Representatives committee found that Boeing’s engineers made incorrect assumptions, its management made “troubling” misjudgments, and its regulator, the US Federal Aviation Administration, provided “grossly insufficient oversight” because of inappropriate closeness with Boeing.
Airlines are weighing up when to reintroduce the jet into their fleets. American told employees it would add the jet back into its fleet by the end of 2020, according to news reports, while Southwest Airlines plans to wait until next year.