Boeing reports big loss, signals more job cuts
Boeing suffered a bigger-than-expected loss in the latest quarter, the company announced Wednesday, and signaled additional job cuts are likely as it contends with a protracted air travel downturn amid the coronavirus pandemic.
The aerospace giant, which previously suspended the dividend for shareholders and announced a 10 percent staff downsizing, also said it would phase out production of the iconic 747 jumbo jet and ratchet back production plans on other commercial aircraft due to the weak outlook.
Those moves are expected to lead to further job cuts.
"Regretfully, the prolonged impact of COVID-19 causing further reductions in our production rates and lower demand for commercial services means we'll have to further assess the size of our workforce," Chief Executive Dave Calhoun said in a message to employees.
"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."
Calhoun, in an interview with CNBC, said the latest surge in US coronavirus cases made the near-term travel outlook "more difficult" because airlines that had added flights amid a brief uptick in interest are now cutting back.
But there also was "more optimism about a vaccine" for COVID-19 sometime in 2021 that would support an industry recovery, he said.
- Ending 747: an 'emotional' decision -
The company suffered a $2.4 billion loss in the quarter ending June 30 as revenues plunged 25 percent to $11.8 billion.
The hit from coronavirus has prolonged and worsened Boeing's slump due to the crisis surrounding the 737 MAX, which was grounded globally in March 2019 following two deadly crashes.
Boeing said it was making "steady progress" towards getting the MAX recertified to fly, after the Federal Aviation Administration completed test flights earlier this month. That process, too, was delayed by the pandemic.
The company resumed some activity on the MAX in May after completely halting work for a few months, but on Wednesday slowed the production plans further.
Boeing said it planned to gradually increase output of the aircraft to 31 a month at the beginning of 2022, a delay from the earlier plan to hit that level in 2021, and a far cry from the 57 a month target for 2020 before the coronavirus disruption.
The Boeing chief also lowered the output plans for the 777 and the 787 and said the company would cease production of the 747 in 2022.
In the television interview, Calhoun said ending the 747 was an "emotional decision for everyone" at Boeing, but the move bowed to commercial needs.
"This is just us facing reality," he told CNBC. "Our customers want the new technology."
But he said the company would continue to service the 747s already on the market for decades into the future.
"Our customer commitment does not end at delivery, and we'll continue to support 747 operations and sustainment well into the future," Calhoun said.
While Boeing's commercial plane business has been battered by COVID-19, the company reported flat revenues from its defense and space business compared with the year-ago period
Calhoun said these programs ensured "some critical stability for us in the near-term as we take tough but necessary steps to adapt for new market realities," according to a Boeing earnings release.
He told CNBC he does not expect to need additional financing following a $25 billion bond offering earlier this spring that is expected to provide enough cash to get through the downturn.
The company's share price initially gained ground, but then retreated and was down 3.5 percent to $165 in early trading.