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October 30, 2020

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Battered Boeing deepens job cuts

Source: AFP | 00:13 UTC+8 October 30, 2020 | Print Edition

Pressured by a prolonged commercial travel downturn and the hit from the 737 MAX crisis, Boeing on Wednesday announced an additional 7,000 job cuts that will lower headcount by 30,000 positions over two years.

The planemaker, which has been in belt-tightening mode throughout 2020 in the wake of the coronavirus on top of the 737 MAX’s protracted grounding, reported another quarterly loss and said it will shrink headcount down to 130,000 at the end of 2021 from 160,000 in January, a nearly 19 percent drop in less than two years.

“The global pandemic continued to add pressure to our business this quarter, and we’re aligning to this new reality by closely managing our liquidity and transforming our enterprise to be sharper, more resilient and more sustainable for the long term,” said Chief Executive Dave Calhoun.

A steep drop in commercial plane travel has prompted airlines to cancel plane orders or defer deliveries, crimping Boeing’s revenues.

On top of that, the company’s finances have been under pressure due to the grounding since March 2019 of the Boeing 737 MAX, which is nearing regulatory approval to resume service after a lengthy oversight process by air travel authorities.

In the third quarter, Boeing reported a loss of US$449 million, compared with profits of US$1.2 billion in the year-ago period, as revenues fell 29.2 percent to US$14.1 billion.

The latest quarter of red ink takes Boeing’s losses for all of 2020 to US$3.5 billion.

Calhoun has emphasized that while Boeing faces a difficult medium-term environment, it expects airline demand to eventually return, and the company is well-positioned in the defense and space business, which is steadier than commercial travel.

The latest job cuts come after Boeing previously trimmed production of leading planes due to the downturn in travel. It did not announce further reductions on Wednesday.

Calhoun, in an interview with CNBC, said the current production rates are “appropriate” in light of expectations.

“I’m confident that the forecast that we are handing out today is a conservative forecast that we can live to,” he said.

Calhoun said the latest spikes in the coronavirus likely mean airlines will garner less travel the rest of the year than they previously expected.

But the Boeing CEO expects a shift in sentiment in the latter half of 2020 due to the vaccine, which “by all accounts seems to be way ahead of where we imagined it would be,” Calhoun told CNBC.

By the end of 2020, there will be a “change to psychology with respect to the vaccine,” he said. “And then I’m open that the recovery could come sooner rather than later.”

Calhoun still expects a full recovery in airline demand to pre-coronavirus levels to take around three years, he said on a conference call with analysts.

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