MIAMI – Boeing has announced plans to begin a reduction in production rates. Boeing CEO Dave Calhoun issued a letter to employees stating two facts. The company has to attempt to deal with quarterly results and market realities.
Dave Calhoun in his letter said, “These past few months have been unlike anything we’ve seen. The pandemic’s effect on our communities and industry is ongoing. And the challenges we face as a company are still unfolding.”
The letter detailed plans that the company is now intending to layout to better position itself for the future. It seems then that the impact of the COVID-19 pandemic has not yet fully shown itself to the aviation industry.
Fleet Groundings and Retirements
Over these last few months, Boeing has seen a growing trend of airlines grounding their fleet and retiring aircraft as they make sweeping changes to fleet management.
The most notable of these was the shock announcement made by British Airways (BA) to retire their entire fleet of 31 Boeing 747-400 aircraft with immediate effect.
Boeing reported second-quarter revenue of US$11.8bn with GAAP loss per share of around $4.20 and core loss per share of $4.79, which the company said is primarily reflecting the impacts on the global markets from COVID-19 and the 737 MAX grounding.
Restart of Operations
The second-quarter report saw Boeing announce a production restart of operations across key sites following temporary pauses. This move was to protect as much of the workforce.
Boeing also introduced rigorous new health and safety procedures. The aim is to ensure the workplace follows new government advice and regulations on how to best protect the workforce.
Boeing has also resumed early stages of production on the 737 programs with a focus on “safety, quality and operations excellence.” it is doing so following the lead of international aviation regulators.
The manufacturer said it has made steady progress towards the safe return to service of the 737. This announcement follows the completion of FAA certification flight tests.
Staff and Production Rate Changes at Boeing
Major changes were mentioned in the letter regarding the Boeing staff. Mainly, it outlines the changes that will be made in production rates across their entire production facility.
The 737 production rates will now have a slower than initially planned ramp-up in rates. The company is now making a gradual increase to 31 aircraft produced per month by the beginning of 2022.
Other changes that will be implemented into the production rates predictions are:
- Combined reductions in the 777/ 777X rates with it being taken down to only two aircraft per month in 2021, which is one unit lower per month than the previously announced numbers in the last quarter
- The 787 Dreamliner will be once again reduced down again to only six per month in 2021, it was initially planned to be 10 per month which was announced in the last quarter, since then, however, the production rate had seen a drop below this planed number to its current rate of seven per month.
- Boeing also announced a similar set up to Airbus, with them confirming that the 767 and the 747 will remain unchanged, with the 747 like the A380 ceasing production in 2022, however, Boeing will continue to support 747 operations and sustainment well into the future.
Additional to its Q2 results, Boeing announced that it would be taking further actions to bolster its near-term liquidity. Boeing states in the letter:
“We suspended our dividend, terminated our share repurchasing program, reduced discretionary spending and overhead costs, and issued $25 billion in new debt.”
Further Job cuts on the Horizon
Mr. Calhoun said, “We remained focused on the health of our employees and communities while proactively taking action to navigate the unprecedented commercial market impacts from the COVID-19 pandemic.”
“We’re working closely with our customers, suppliers and global partners to manage the challenges to our industry, bridge to recovery and rebuild to be stronger on the other side.”
The company also said that it could not rule out a further reduction in staff. Boeing announced a 10% net workforce reduction in 2020. The reductions will come in a combination of voluntary layoffs, attrition, and involuntary layoffs.
In this sense, Boeing wants to align the newer and smaller aviation market.
In the letter, Boeing said that unfortunately, it must once again look at further reductions in staff numbers. This is to better adapt to the prolonged impact of COVID-19.
The company CEO said, “This is difficult news, and I know it adds uncertainty during an already challenging time. We will try to limit the impact on our people as much as possible going forward. And as always, we will communicate openly, honestly, and transparently with you.”
Planning in Uncertain Times
With these announcements, it seems that Boeing is planning for a long-term impact on the aviation industry. Many would have expected a quicker return to the skies.
However, new regulations changing around the globe due to spikes in COVID-19 levels have left many airlines unsure of the near future.
Basically, it is difficult for carriers to plan and layout detailed steps and processes required to return their full fleets back to the air.
There can be no doubt that the impact this pandemic will have on the aviation industry will be much larger than intially thought.
Most airlines and experts now predict pre-COVID levels no earlier than 2024. Alas, many troubling times and decisions will need to be made between now and then.