Boeing 777-9x N779XW (WH001) during his first takeoff in Everett Airport (KPAE). Photo: Brandon Farris

MIAMI – Following its latest loss report, Boeing CEO Dave Calhoun informed employees that 10% in workforce reductions in the form of voluntary and involuntary layoffs, as well as turnovers, will be necessary.

The decision comes after the company’s commercial customers have cut demand by 15%. The cut represents around 16,000 jobs from a total of 160,000 Boeing employees, reported CNN and Reuters.

Financial scenario regarding air travel

As Boeing disclosed a massive first-quarter loss of about US$1.7b from its core operations, it cut staff and aircraft production, especially those of the 787 Dreamliner and the Boeing 777, due to the plunge in air demand.

Calhoun also said that he did not know how many involuntary layoffs would take place, but the aerospace corporation offered 70,000 workers a voluntary layoff package.

The negative impact on Boeing finances have been increasing due to the plunge in the 737 MAX demand and its subsequent cancelations, in addition to the delayed and halted aircraft orders by several airlines.

On April 17, GECAS decided to cancel 69 orders of Boeing 737 MAX. On its part, Boeing had already announced that it reached an agreement with GECAS to restructure its MAX order book.

In addition, just last week Boeing terminated its Master Transaction Agreement (MTA) with Embraer, under which the two companies were meant to establish a new strategic partnership to develop new markets.

Further, the financial scenario worsened for Boeing as its sites have been closed due to government health guidelines and precautionary measures after several Boeing workers had tested positive for COVID-19.

Lastly, by the end of Q1 2020, Boeing had a cash balance of about US$15.5b after it dismissed US$13b in cash from a credit line.

Expected scenario

Calhoun added that the general expectation for international travel is that its rebound would take longer than the domestic one would.

However, Boeing does not expect that its cost-cutting actions would delay the development plans for new commercial jets, which are currently at a design stage.

Regarding the slashed operations, the 787 Dreamliner will be postponed seven months and the Boeing 777 three a month.

With these staff and production cuts, Calhoun is trying to diminish the financial blow from the COVID-19 pandemic as he tries to keep a conservative outlook on the near-term future of the company’s core operations.