Coronavirus Crisis: Boeing cutting more than 12,000 US jobs, thousands more planned ⁰

Boeing Co (BA.N) says it is eliminating more than 12,000 US jobs as the largest American planemaker restructures in the face of the coronavirus pandemic.

Boeing also disclosed it plans “several thousand remaining layoffs” in coming months but did not say where those would take place.

Boeing is slashing costs as a sharp drop in airplane demand during the pandemic worsened a crisis for the company whose 737 MAX jet was grounded last year after a second fatal crash.

Boeing said it restarted 737 MAX production at a “low rate” at its Renton, Washington factory. Reuters reported in April that regulatory approval for the MAX was not expected until at least August.

Boeing shares closed up 3.3% at $149.52, then rose another 4.6% to $155.84 after hours on news of the MAX production restart.

The company announced in April it would cut 10% of its worldwide workforce of 160,000 by the end of 2020. Boeing said Wednesday 5,520 US employees will take voluntary layoffs, and also disclosed it was notifying 6,770 workers of involuntary layoffs.

Chief Executive Dave Calhoun told employees in an email the “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. … I wish there were some other way.”

CFRA analyst Colin Scarola upgraded Boeing to buy and raised his price target to $174 from $112 saying Boeing “can weather its current crises and grow over the long term.”

In April, Boeing recorded zero orders for the second time this year and customers canceled another 108 orders for the 737 MAX, compounding its worst start to a year since 1962.

Last month, Boeing raised $25 billion in a bond offering that allowed it to avoid taking government aid.

The job cuts include more than 9,800 employees in Washington State. Boeing said the “several thousand remaining layoffs will come in additional tranches over the next few months.”

Boeing said it expects to resume 737 MAX deliveries in the third quarter following regulatory approvals before gradually increasing to 31 per month during 2021.

The aerospace sector has been hard hit including many Boeing suppliers.

General Electric Co (GE.N) said this month it planned to cut its aviation unit’s global workforce this year by as much as 25%, or up to 13,000 jobs. SpiritAero Systems Holdings (SPR.N) announced it is cutting another 1,450 jobs in Kansas.

American Airlines to cut management, support staff by 30%

American Airlines Group Inc must reduce its management and support staff by about 30% and may have to cut frontline employees as it downsizes due to the coronavirus outbreak, showed a letter to employees made public on Wednesday.

All major US airlines have said they will need to shrink in the fall, once US government payroll aid that bans involuntary job cuts expires on Sept. 30.

Competitor United Airlines Holdings Inc has also said it will need to reduce its management and administrative staff by about 30%.

Despite the bailout and other liquidity raises, American must “plan for operating a smaller airline for the foreseeable future,” Executive Vice President of People and Global Engagement Elise Eberwein said in the letter.

American, with over 100,000 employees, will offer voluntary options before implementing involuntary reductions if there is not enough take-up, she said.

Once it has reduced its management ranks, the company will turn to frontline employees including flight attendants and pilots, who will receive fresh voluntary leave and early retirement options in June with the aim of avoiding involuntary furloughs.

“This is a goal, though, not a commitment, and a stretch goal at that,” Eberwein said, adding the company will be working with unions in coming weeks and months.

American has said it is accelerating fleet retirement and expects to fly roughly 100 fewer aircraft in the summer of 2021. Nearly 40,000 employees have already opted for temporary voluntary leave or early retirement.

Earlier, American Chief Executive Doug Parker said the airline hoped to avoid furloughs and rejected speculation that it or another major US carrier will have to file for Chapter 11 bankruptcy protection due to the coronavirus crisis.

(Source: Reuters)