Boeing to cut local workforce by up to 15% after huge loss

CHICAGO — The Boeing Co. is cutting its workforce and slowing production of planes in Everett and Renton to deal with a downturn in business that started with the grounding of its best-selling jet and has accelerated because of the coronavirus pandemic.

Boeing said Wednesday it has started to shrink through attrition, paying people to leave and imposing layoffs as necessary.

The job cuts will be deepest — more than 15% — in the Commercial Airplanes division. Deliveries of those planes has plummeted by two-thirds in 2020, compared with a year earlier. Boeing’s defense and space unit will likely see the fewest jobs eliminated.

Job cuts of 10% to 15%, if applied evenly, could mean a loss of 7,000 to 10,500 employees in the local workforce. Boeing last week began offering voluntary layoff packages to employees as a first step toward reducing payroll.

The company began the year with about 161,000 employees. Boeing has more than 70,000 employees in commercial and defense operations in Washington, with about 36,000 in Everett and thousands more in Renton.

The company announced the job cuts as it reported a loss of $641 million in the first quarter. It earned $2.15 billion in the same period last year. Revenue fell 26%, to $16.91 billion.

“I know this news is a blow during an already challenging time,” CEO David Calhoun said in a memo to employees. “I regret the impact this will have on many of you. I sincerely wish there were some other way.”

Calhoun said Boeing will reduce production of 787 and 777 jets, which are made in Everett, and slowly resume production of the grounded 737 Max, assembled in Renton, at “low rates” this year, gradually rising to 31 a month next year. Boeing was building 52 Max jets a month before regulators around the world grounded the plane in March 2019 after two crashes that killed 346 people.

After another delay, Boeing now expects to get federal approval to resume deliveries of Max jets before the end of September.

The 787 production rate will fall to 10 per month in 2020 and to seven per month by 2022, “continuing to evaluate the rate after that,” Calhoun said. Boeing has been building 14 per month, seven each in Everett and in North Charleston, South Carolina, and in January said it would go down to 10 per month in late 2021.

Now that timetable has been accelerated, and a key question is how production will be divided between the final assembly sites in South Carolina, where some fuselage sections are also built, and Everett.

Boeing also will slow production in Everett of the 777 and 777X, to three per month in 2021 from the current 5 a month. It will “take a measured approach” to ramping up the new 777X, which is in flight tests.

Production of the 767 will remain at three per month, and the 747 jumbo jet will continue to be built at a snail’s pace of one plane every two months.

Global air travel fell 53% last month compared with March 2019, the largest drop in recent history and a return to levels not seen since 2006, the International Air Transport Association, an airline trade group, said Wednesday. Nearly two-thirds of the passenger jets around the world have been idled, according to aviation data firm Cirium.

Boeing’s European rival, Airbus, reported a first-quarter loss of 481 million euros ($515 million), meanwhile. Airbus recently decided to cut production of jetliners by about one-third, and CEO Guillaume Faury said Wednesday that the company — which has already furloughed more than 6,000 workers — will study further “resizing” when the post-pandemic size of the airline industry is more clear. That is a worrying prospect on a continent where Airbus has factories in four countries.

“We are still at an early stage of this crisis,” said Faury, who called it the gravest situation ever for the aerospace industry.

Faury said airline customers are asking for delays in receiving new planes, which he called the company’s biggest current issue. Some Boeing customers, notably Southwest Airlines, are also negotiating to delay deliveries, and with fewer planes flying, Boeing’s service business has dropped too.

Calhoun called the virus pandemic a “body blow to our business.”

“The aviation industry will take years to return to the levels of traffic we saw just a few months ago,” Calhoun said.

Boeing temporarily shut down assembly lines in Washington and South Carolina after workers tested positive for the virus. The Seattle-area plants have resumed activity, and workers are scheduled to return to the South Carolina plant beginning Sunday.

Boeing was in financial trouble before the virus outbreak, however. The grounding of the Max added billions in costs and cut deeply into revenue last year, leading to Boeing’s first money-losing year in two decades. The company faces criminal and civil investigations and a flurry of lawsuits by families of the people killed in the crashes.

Boeing has borrowed billions to get through its worsening situation. The company ended March with $15.5 billion in cash, up from $10 billion three months earlier, but piled on $11.6 billion in new debt, which now totals $38.9 billion.

Boeing is considering applying for a federal loan made possible by last month’s $2.2 trillion virus-recovery measure, but Calhoun has said the company could turn to private sources instead, a move that would avoid giving the government an equity stake in Boeing.

The company has reduced spending, and over the weekend, it terminated a deal with Brazilian aircraft maker Embraer, which analysts said will help Boeing conserve cash but weaken its position against rival Airbus in the market for smaller passenger jets.

Shares of Boeing rose 6.1% in trading Wednesday. Even with the rally, however, they have dropped 57% so far this year, mirroring the plunge in airline stocks.