Aircraft manufacturer Boeing has announced it will make around
10 per cent of its workforce redundant due to a planned reduction in production
rates brought on by the Covid-19 pandemic.
In a letter to employees addressing the company’s Q1
results, in which it reported a pre-tax loss of US$1.5 billion compared to a $2.3
billion profit last year, Boeing CEO Dave Calhoun described the global pandemic
as a “body blow to our business”.
With airlines expected to lose $314 billion in revenue this
year, the manufacturer said airline customers are delaying purchases of new aircraft,
“putting the breaks on delivery schedules” and deferring elective maintenance,
all of which Calhoun said are having a “dramatic impact” on the company’s
commercial services business.
The company is also still suffering from the continued grounding
of the 737 Max, which was pulled from service across the world in March 2019
following two crashes in which 346 people were killed.
Boeing is still hopeful the 737 Max could return to service
this year, but it has reduced its production rates on the aircraft’s assembly line,
gradually increasing to 31 planes per month in 2021 and increasing again after
that in line with market demand.
In addition, the company will only produce ten 787s per
month in 2020, dropping to seven by 2022, while the 777/777X production rate
will fall to three per month in 2021. Rates for the 767 and 747 will remain
unchanged.
As a result of these lower production rates, Boeing has
begun the process to lower the number of employees by around 10 per cent
through a combination of voluntary layoffs, natural turnover and involuntary
layoffs where necessary. The company’s commercial airplanes and services
businesses and its corporate functions will be the worst-hit departments with
staff reductions of more than 15 per cent.
Boeing employs around 150,000 people worldwide, meaning its
redundancy plan puts up to 15,000 jobs at risk.
Calhoun wrote to employees: “I know this news is a blow
during an already challenging time. I regret the impact this will have on many
of you. I sincerely wish there were some other way.
“Please know that we will do everything we can to minimise
that impact, and as we take these steps, we will be as fair and transparent as
possible – and absolutely honest and respectful.”
Other steps Boeing has taken to cut its overheads include
reducing discretionary spending, suspending dividend payments and extending a
pause on share buybacks. Calhoun and chairman Larry Kellner are also foregoing their
salaries for 2020.
Nevertheless, Boeing said it burned through $4.3 billion in
cash during the first quarter. The company had been in talks with Embraer about
buying its regional airline business for $4.2 billion, but negotiations failed
at the weekend and Boeing pulled out of the purchase.