Boeing said Wednesday it plans to cut aircraft production and warned about the possibility of further reductions in its workforce as the impact of the coronavirus pandemic ravages demand for air travel.
Boeing shares tumbled more than 3% on Wednesday and have lost more than half their value over the past year.
The pandemic has driven up financial losses at Boeing’s airline customers and hurt demand for new planes. Boeing was in crisis before the coronavirus spread around the world because of the fallout from two fatal crashes of its 737 Max that claimed 346 lives.
Weaker demand prompted Boeing earlier this year to announce a planned workforce cut of 10% of its 160,000-person staff, through buyout packages and involuntary 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,” CEO Dave Calhoun said in a staff note after the company released a $2.4 billion quarterly loss. “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.”
Here’s how Boeing did compared with what Wall Street expected, based on average analysts estimates compiled by Refinitiv:
- Losses per share: $4.79 a share, adjusted, vs $2.54 expected
- Revenue: $11.8 billion vs $13.16 billion expected
The company’s second-quarter results came in worse than analysts expected. Revenue fell 25% to $11.81 billion from $15.75 billion a year earlier and below analysts’ forecasts for sales of $13.16 billion. The commercial aircraft unit suffered the most with a 65% drop in revenue from a year earlier to $1.6 billion as deliveries of new planes tumbled.
Boeing’s defense unit proved more resilient than its commercial business, bringing in $6.6 billion, roughly flat on the year.
For the quarter ended June 30, Boeing’s net loss narrowed to $2.40 billion, or $4.20 per share, from $2.94 billion, or $5.21 per share, a year earlier, when it posted a nearly $5 billion charge on its beleaguered 737 Max program.
On an adjusted basis, Boeing lost $4.79 per share, compared with a $2.54 per-share loss Wall Street estimated.
Boeing’s shares were down about 1% in morning trading. But the stock is trading at roughly half its value from a year ago. Regulators aren’t expected to clear the 737 Max to fly again before the fall.
The lengthy grounding of the 737 Max along with financial pain at carriers has driven up cancellations and scarce new orders new Boeing jetliners this year, meaning less cash for manufacturers and suppliers.
“There is a customer calling us every day with a desire to want to defer and to deal with the difficult environments that they are dealing with,” Calhoun said in an interview with CNBC’s “Squawk on the Street.”
Calhoun said he expects an uneven recovery and that demand for new aircraft won’t likely return until the second half of next year, depending on timing of a coronavirus vaccine.
The impact has already trickled down to General Electric and Spirit Aerosystems. Spirit, which makes the fuselages for the Max, asked lenders to loosen the terms on some of its debt, sharing a forecast for far fewer deliveries of the 737s than originally expected, according to a forecast seen by CNBC.
Boeing confirmed plans to lower its planned ramp-up of production. It said it would gradually increase manufacturing of its 737 Max to 31 a month by the beginning of 2022, later than it had expected. It will again cut production of its 787 planes to six a month next year.
Boeing also said it would end production of the 747, a plane it has produced for more than five decades and is credited with spurring a boom in travel worldwide, in 2022.
Boeing has more than 470 planes sitting on the ground that haven’t been delivered to customers, most of them 737 Max jets, according to consulting firm Ascend by Cirium.
Airbus, Boeing’s main rival, is also hurt by the crisis and is set to report results on Thursday.
Calhoun said in April that air travel demand will likely take two or three years to recover. International demand has been particularly soft, hurting the outlook for Boeing’s widebody commercial planes, like the 787 Dreamliner. The International Air Transport Association, a trade group that represents most of the world’s airlines, said Tuesday it expects passenger air travel demand globally to recover to 2019 levels in 2024, a year later than it previously forecast.
Boeing has shored up liquidity with a monster $25 billion debt sale in April, Boeing’s largest ever, to help weather the crisis.
Correction: A table in an earlier version of this story said earnings per share. Boeing posted a loss.