- Boeing burned through $4.3 billion in cash in the first quarter and lost $641 million in revenue, the company announced Wednesday.
- It also announced production cuts on its commercial airplane assembly lines, and cuts to about 10% of its workforce, including layoffs.
- The company is being battered by dual crises from the COVID-19 pandemic and the 737 Max disaster, which has dragged on for more than a year.
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Boeing announced Wednesday that it burned through $4.3 billion in cash in the first quarter and lost $641 million in revenue, as the company braces for a prolonged impact on the aerospace sector from the COVID-19 pandemic, combined with the ongoing 737 Max crisis.
The company also announced that it would significantly pare back its aircraft production, adding to a suspension of 737 Max assembly that has been in place since January. Assembly of Boeing’s 787 Dreamliner will be cut from 14 to 10 per month in 2020, and seven by 2022. Production of the 777 family of aircraft will be cut from five per month to three by 2021.
The 737 Max, which was produced at a rate of 42 per month from April 2019 through January, will be ramped up at a slower rate when production resumes, the company said, gradually increasing to 31 per month during 2021.
The cuts align with earlier analyst forecasts predicting a 30-40% reduction in assembly rate. The company has an order backlog of 5,049 planes, including 4,079 of the 737, but the possibility of cancellations or deferrals looms large as the pandemic continues to affect airlines and aircraft-leasing companies.
In an email to employees and during an appearance on CNBC, CEO Dave Calhoun said it would cut about 10% of its payroll, or about 16,000 positions. The cuts are expected to be through a combination of buyouts, attrition, voluntary layoffs, and eventually involuntary layoffs.
The cuts will be deepest in Boeing’s commercial airplane unit, impacting about 15% of employees, CEO Dave Calhoun said in the email. 45% of the company’s revenue comes from defense, Calhoun said, which has seen less of an impact.
Revenue fell about 26% from the same quarter last year to $16.91 billion, down from $22.92 billion, with a loss per share of $1.70.
Boeing and European rival Airbus face a bleak market outlook for the foreseeable future as travel demand plummets due to the COVID-19 pandemic. Air travel is down as much as 97%, with a recovery expected to take anywhere from two to five years, according to analysts and industry executives.
Airlines have grounded significant portions of their fleet and have begun retiring planes early in response, but are still routinely seeing load factors in the single digits, with a few notable exceptions. That drop in demand means that airlines have less of a need for new planes, a dramatic turn for an industry that was rapidly expanding until earlier this year. Low fuel prices similarly disincentivize airlines to spend on more fuel efficient newer planes.
The poor positioning comes a year into Boeing’s ongoing 737 Max crisis, which has already cost the company billions. The plane, Boeing’s best-seller, has been grounded worldwide since March, 2019, after the second of two fatal crashes within five months. 346 people were killed in the two crashes.
Boeing is expected to further outline cost-cutting steps and future plans during a 10:30 a.m. ET call with analysts, and a later media briefing. The company is also expected to announce whether it will apply for assistance through the federal CARES Act; Calhoun has suggested the company will try to avoid relying on federal loans through the Act, which would see the government take equity in the company.