Boeing Posts Huge First Quarter Loss, Plans To Cut 10% Of Workforce

Aviation giant Boeing (BA) plans to reduce its workforce by 10% after posting a first quarter loss of $641 million, or $1.70 per share, on Wednesday.

Boeing’s revenues plunged by 26% to $16.91 billion in the quarter. Analysts had expected Boeing to report a per-share loss of $1.61 and revenues of $17.3 billion. It was Boeing’s second straight quarterly loss.

One year earlier Boeing recorded a profit of $2.15 billion, or $3.16 per share.

Boeing also said it burned through $4.3 billion of cash in the first quarter as it battled the coronavirus pandemic and the continued grounding of its once popular 737 Max aircraft.

The planned job cuts will be done through voluntary measures or “involuntary layoffs as necessary,” the company indicated. Boeing had about 160,000 employees at the end of 2019.

The job cull will be deepest in the commercial airplane unit -- which will lose about 15% of its positions. “We’ll have to make even deeper reductions in areas that are most exposed to the condition of our commercial customers -- more than 15% across our commercial airplanes and services businesses, as well as our corporate functions,” said CEO Dave Calhoun.

Boeing also said it will reduce production of the 787 Dreamliner aircraft by one-half – to 10 per month in 2020, then down to 7 per month by 2022.

Boeing is also mulling production cuts for its 777 and 777X models.

Simple Flying speculated that the cut in production rates suggests Boeing anticipates a wave of cancellations or deferrals of its pending orders.

“The pandemic is also delivering a body blow to our business -- affecting airline customer demand, production continuity and supply chain stability,” Calhoun added. “The demand for commercial airline travel has fallen off a cliff.”

Calhoun warned that it may take up to three years for air travel demand to return to 2019 levels.

The company finished the first quarter with $15.5 billion in cash. But its total consolidated debt surged by 42% to $38.9 billion from last quarter.

"Access to additional liquidity will be critical for Boeing and the aerospace manufacturing sector to bridge to [a] recovery, and the company is actively exploring all of the available options. Boeing believes it will be able to obtain sufficient liquidity to fund its operations," the company wrote.

Boeing could conceivably receive some $17 billion in economic relief from the federal government, but Calhoun has rejected notions of the state carving out a stake in the company in exchange for federal loans.

Boeing has already suspended its dividend and nixed a planned merger with Brazilian plane maker Embraer (ERJ).

Tom Boon of Simple Flying wrote: “Boeing is, for the time being, stuck in a rather unpleasant space in terms of aircraft production. The company has been forced to suspend production of the 737 MAX, previously one of its big sellers. Additionally, some of its older widebody products are falling out of favor. This means that the company is pinning most of its deliveries on the Boeing 787 Dreamliner.”

In the first three months of 2020, Boeing delivered only 50 aircraft, down from 149 in the same period in the prior year.