Boeing Posts Huge Second Quarter Loss, Warns Of More Cuts In Production, Jobs

Boeing (BA) posted a second quarter net loss of $4.20 per share on revenues of $11.8 billion as the COVID-19 pandemic and the grounding of the 737 MAX aircraft continues to hurt its operations.

In the year-ago period, Boeing posted a net loss of $2.94 billion, or $5.21 per share, on revenue of $15.75 billion.

Boeing also reported operating cash flow of minus-$5.3 billion in the second quarter of 2020, primarily reflecting “lower commercial deliveries and services volume due to COVID-19 and the 737 MAX grounding,” as well as timing of receipts and expenditures

"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," Boeing’s President and Chief Executive Officer Dave Calhoun said. "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 aerospace giant also noted that it restarted operations in some of its key facilities in the second quarter after the pandemic forced it to halt activities.

“The company also resumed early stages of production on the 737 program with a focus on safety, quality and operational excellence,” Boeing stated. “Following the lead of global regulators, Boeing made steady progress toward the safe return to service of the 737, including completion of [Federal Aviation Administration] certification flight tests.”

Boeing also said that because of the “sharp reduction in commercial market demand” it will also be “further adjusting commercial airplane production rates and reducing employment levels.”

In a letter to employees, Calhoun warned about the current state of the aviation sector.

“Though some fliers are returning slowly to the air, their numbers remain far lower than 2019, with airline revenues likewise reduced,” he said. “This pressure on our commercial customers means they are delaying jet purchases, slowing deliveries, deferring elective maintenance, retiring older aircraft and reducing [spending].”

Calhoun estimated it will take about three years for airlines to return to 2019 passenger levels.

“Unfortunately, it’s become clear that we need to make further adjustments based on the prolonged impact of COVID-19,” Calhoun added. “We will have a slower ramp-up in 737 production than previously planned, with a gradual increase to 31 per month by the beginning of 2022. We will reduce the combined 777/777X production rate to two per month in 2021, which is one unit lower per month than we announced last quarter.”

Boeing, he added, will also reduce 787 production to six per month in 2021 – down from 10 currently.

As a result of these and other production cuts, Calhoun warned of the likelihood of more layoffs.

“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,” he said. “We will try to limit the impact on our people as much as possible going forward.”

Barron’s characterized Boeing’s second quarter earnings as “terrible,” adding that the company has burned through more than $10 billion in cash so far this year.