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Boeing to Slash 7,000 Jobs in Another Round of Reductions, Pegging Airline Recovery at 3 Years

Madhu Unnikrishnan

October 28th, 2020 at 1:22 PM EDT


Boeing, after grappling with the grounding of its best-selling aircraft, now faces a commercial aviation market that won’t recover for at least three years, CEO David Calhoun said Wednesday on the company’s third-quarter earnings call.

This is slightly more optimistic than IATA’s forecast, which holds that the industry won’t return to 2019 traffic levels until 2024. But Boeing is encouraged by the recovery in China, where domestic traffic is approaching last year’s levels. Domestic passenger traffic in the U.S., however, is only 49% of last year’s levels, while international traffic is only 12%. Still, the company sees glimmers of hope in airlines re-fleeting to retire older, less efficient aircraft, Calhoun said.

Boeing earlier this year said it would reduce staffing by 10% and has already reduced its workforce by almost 20,000 employees. The company has had two rounds of voluntary separation and one round of involuntary layoffs. It now expects another 7,000 employees to leave the company through a combination of voluntary separation and layoffs by the end of the year. Boeing’s total headcount is expected to be about 130,000 employees by year’s end.

The company is adjusting to its diminished market by moderating its aircraft-production rates. The B737 family will return to its rate of 31 aircraft per month by 2022. Production of B787 aircraft is expected to fall from 10 per month now to six per month next year, and B777-family aircraft will go from five per month this year to two per month next year. The company also consolidated B787 production at its South Carolina facility. Boeing expects the B777X to enter into service in 2022, pending regulatory review.

Boeing is encouraged by the regulatory review of the grounded B737 MAX, Calhoun said. The FAA has said it could re-certify the aircraft by year’s end, and American Airlines is already scheduling the type for December flights. Boeing has 450 B737 MAXs in storage awaiting delivery to airlines. The company may have to put an unspecified number of those aircraft back on the market, due to order cancellations and deferrals, Calhoun said. The B737 MAX was grounded worldwide last year in the wake of two fatal accidents, in Indonesia and Ethiopia. The company has updated its flight-control software and is awaiting regulatory clearance.

Calhoun admitted that the B737 MAX’s grounding has cost the company market share in the critical narrowbody segment. “When you don’t produce an aircraft for a year and the other guy [Airbus] does, you take a big hit with respect to [market] share,” he said. He further admitted that the A321 fills a niche that Boeing does not. The company will return to work on the NMA mid-market aircraft concept, but he did not specify a time.

Boeing reported third-quarter revenues of $14.1 billion, down 29% from last year. Its Commercial Airplanes unit reported a $1.4 billion loss on $3.6 billion in revenue, down 56% from last year. The company delivered 28 commercial aircraft in the quarter, compared with 62 for the same period last year. Boeing’s defense unit reported $628 million in earnings on $6.8 billion in revenues, down 2% from last year.

Madhu Unnikrishnan

October 28th, 2020 at 1:22 PM EDT

Photo credit:  Boeing

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