Boeing on Wednesday announced it will shrink its workforce further, saying that by the end of next year it will employ 31,000 fewer people companywide than at the beginning of this year.
That’s a cut of just over 19% — from 161,000 to 130,000 — almost double the previous plan to cut 16,000 jobs or 10% of the total workforce.
Boeing CEO Dave Calhoun warned three months ago that more cuts would have to be made beyond the 10%, without specifying a figure.
Though Boeing did not break down the local impact of the additional job losses announced Wednesday, many of the cuts will inevitably be made in the pandemic-hit Commercial Airplanes division in the Puget Sound region.
Spokesperson Bradley Akuiburo said that “as with our previous workforce actions, we expect our corporate functions and commercial airplane and services businesses to be most affected.”
In July, Boeing said it would achieve its initial 10% target through 19,000 employees leaving while about 3,000 new hires joined the company, mostly on the defense and space side.
Last month, Boeing said that round of cuts was complete. That included a total of 8,320 employees company-wide opting to leave with severance pay in two separate rounds of voluntary buyouts.
The net impact in Washington state was 12,600 fewer jobs.
This time around, Akubuiro said that beyond natural attrition as employees leave or retire, Boeing is looking at a reduction of about 7,000 additional cuts company-wide through a combination of further rounds of buyouts and layoffs through the end of 2021.
Asked on CNBC Wednesday morning if this would be the end of the job cuts, CEO Calhoun said the forecast is “conservative” but added that “I will never just draw a floor.”
Burning through $55 million a day
In a message to employees Wednesday morning announcing the cuts, Calhoun noted that in the third quarter, “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.”
Boeing reported a net loss for the quarter ending in September of $466 million, or 79 cents per share. That compares to a profit of $1.2 billion, or $2.05 per share, in the same quarter last year.
Adjusting for changes to pension costs, Boeing said its operating loss was $754 million or $1.39 per share for the quarter, down from an adjusted profit a year ago of $895 million or $1.45 per share.
Twenty minutes into trading this morning, with the Dow Jones Industrial Average down 500 points or 1.8%, Boeing shares were down 2.4%.
With the 737 MAX still grounded so that none can be delivered and the global pandemic reducing deliveries of other aircraft, Boeing’s revenue for the three months fell to $14.1 billion, down from $20 billion a year earlier.
Revenues from the Commercial Airplanes division were down 56% compared to a year ago.
Boeing’s defense division made a profit of $628 million, despite another write-off of $67 million on the KC-46 Air Force refueling tanker program, due to extra production costs caused by the COVID-19 pandemic.
During the quarter, free cash flow — the money Boeing took in minus what it spent on operations and capital expenditure — was negative $5.1 billion.
That’s a cash outflow of $55 million per day, down from $62 million per day in the previous quarter.
Boeing ended the quarter with $27 billion of cash on hand, with debt of $61 billion.
The backdrop to Boeing’s losses is the financial stress on airlines.
International Air Transport Association (IATA) data shows that worldwide air passenger traffic fell 64% this year through August. Almost 7,000 aircraft are parked on the ground, cutting in half the total fleet capacity in terms of airplane seats.
In a presentation Tuesday to the International Society of Transport Aircraft Trading (ISTAT), aviation data analysis firm Cirium forecast that the pandemic is likely to render about 4,000 passenger aircraft permanently surplus.
Cirium’s global head of consultancy, Rob Morris, said about 10% of those aircraft could be converted to freighters. The rest are “doomed,” meaning they will be scavenged for parts or simply scrapped.
Separately, Morris said Cirium research indicates that of the roughly 450 737 MAXs Boeing has built but hasn’t been able to deliver, as many as 200 will have to be reallocated to a new airline because the original customer no longer wants them.
On CNBC, Calhoun said distribution of an effective COVID-19 vaccine in the first half of next year could lead to a robust recovery in the second half.