American plane maker Boeing announced Wednesday (27 May) that it will cut more than 13,000 employees as it continues to try to ride out the storm of the COVID-19 pandemic and the grounding of its once best-selling 737 MAX that was involved in two crashes that killed 346 people.
Boeing announced roughly 6,770 involuntary layoffs among US employees and a further 5,520 who took “voluntary severance packages”. The initial cuts were larger than expected union officials said in media reports. Boeing said the layoff notices delivered this week will be the largest part of plans announced last month to shed about 10 percent of its 160,000-strong global workforce this year as it cuts commercial plane production as airlines remain grounded around the world and have deferred or outright cancelled orders.
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Boeing has about 18,000 international employees and is cutting about 700 jobs in Canada, Australia and New Zealand. The company said Wednesday that it is still working on overseas layoff plans. Boeing said the latest cuts are focused on its commercial jetliner business, but didn’t provide details on the units or locations affected. Union officials said in US media reports the cuts are focused on Seattle-area aircraft-assembly operations. Boeing is also expected to cut jobs at its rapidly growing services arm as airlines reduce spending on aircraft parts, as well as at its central corporate offices, executives said last month.
Boeing CEO David Calhoun said in a letter to employees that “the COVID-19 pandemic’s devastating impact on the airline industry means a deep cut in the number of commercial jets and services our customers will need over the next few years, which in turn means fewer jobs on our lines and in our offices. We have done our very best to project the needs of our commercial airline customers over the next several years as they begin their path to recovery. I wish there were some other way.”
Calhoun said in his message that “we are seeing some green shoots. Some of our customers are reporting that reservations are outpacing cancellations on their flights for the first time since the pandemic started. Some countries and US states are starting cautiously to open their economies again. And some parts of our business, most notably on the defence side, will continue hiring to meet customer commitments and fill critical skill positions.” Calhoun also said the industry will come back, “but it will take some years to return to what it was just two months ago”
Boeing said its resumption of its troubled 737 MAX plane will be at a low rate as the company “implements more than a dozen initiatives focused on enhancing workplace safety and product quality”. The company is having to make dozens of fixes to the plane involving software and wiring bundles as well as checking the grounded plane’s fuel tanks for foreign object debris that has been discovered in planes built but not delivered. Boeing did not specify how many planes would be built per month but said it would “ramp up production this year”.
Boeing hopes to win FAA clearance for the MAX in late summer or early autumn. The 737 in its various models has in the past provided about half the revenue of Boeing’s Commercial Airplanes division.
Nicolas Jouan, an aerospace and defence analyst at GlobalData, said “Boeing’s decision to lay off part of its workforce is necessary so that it can readjust its…production to meet declining demand from airlines and leasing companies. These layoffs will primarily touch Boeing’s Puget Sound facility near Seattle, where most assembly lines have already been trimmed – such as for the B787 Dreamliner, which was cut to 10 per month. Despite these cuts, production levels are still too high for the actual demand, and more tough decisions had to be taken in order to ensure the company’s survival.
“Boeing is not alone in this situation as Rolls-Royce and Airbus also announced plans to slim down production,” Jouan added. “Boeing also backtracked from an agreement with regional jet manufacturer Embraer at the end of April, suggesting that demand for short-haul aircraft is not in better shape. Such cuts and caution across the industry are expected to last beyond the COVID-19 outbreak as its main players are now in damage control.
“Air travel has collapsed since the start of the COVID-19 pandemic, which will impose hundreds of billions of dollars of losses on the industry in 2020 alone. Australian flag carrier Qantas has advised that it did not intend to take delivery of new Airbus or Boeing jetliners in 2020 while other clients such as Lufthansa and Kuwait Airways already declared that they intended to reduce their fleet.”
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