Boeing will cut more than 15% of jobs in commercial jet division, CEO says

Boeing said Wednesday it will slash “more than 15%” of jobs in its Seattle-based commercial airplanes division and some smaller units as it pares down the total workforce by 10% to cope with a sharp downturn in the aviation industry.

The company will also slow production of the jets it builds in Renton and Everett.

Boeing has more than 70,000 employees in commercial and defense operations in Washington state, with about 36,000 in Everett and thousands more in Renton.

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

As Boeing announced a first-quarter loss of $641 million and a 26% drop in revenue, CEO Dave Calhoun outlined the planned production cuts. In a message to employees, he said the company has “done a tremendous job of increasing our production rates and services offerings in recent years. But the sharp reduction in demand for our products and services over the next several years simply won’t support the higher levels of output.”

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,” he said. Boeing has been building 14 per month, seven each in Everett and in North Charleston, S.C., 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.

As for the Renton-built 737 MAX, which remains grounded, Calhoun said Boeing will resume production “at low rates in 2020, gradually increasing to 31 planes per month during 2021, with gradual increases to correspond to market demand.”

Through much of the now-14-month MAX grounding that followed two fatal crashes, Boeing continued to build the planes, and before the coronavirus crisis it had aimed to resume producing 42 per month once the Federal Aviation Administration and other regulators gave the go-ahead for the plane to return to commercial service.

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.

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

The company began the year with about 161,000 employees.

Boeing 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.

The job cuts will be deepest in the commercial jet division, as well as its services business and corporate functions. 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.

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

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.

Calhoun called the virus pandemic a “body blow to our business,” causing airlines to delay jet purchases and deliveries. With fewer planes flying, Boeing’s service business has dropped.

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

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

Boeing was in financial trouble crisis 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.

Over the weekend, Boeing terminated a deal with Brazilian aircraft maker Embraer SA, which analysts said will help Boeing conserve cash but weaken its position in the market of building smaller passenger jets.

Information from The Associated Press is included in this report.