It appears that the detrimental economic effects stemming from the coronavirus pandemic are here to stay for the long run, as the excessive government bailouts have done little to preserve jobs and get the economy back on track. Boeing has recently issued a statement to its employees which has been obtained by Bloomberg, offering them a voluntary layoff for the second time since the pandemic began as it plans to pursue workforce cuts beyond the initial 10% target unveiled back in April.
The buyouts will be focused on those employees in the services division, commercial airplanes unit, and corporate operations, stated Boeing’s CEO Dave Calhoun in his message. So far, the airplane giant has reduced its workforce by approximately 19,000, despite receiving a taxpayer-funded bailout as part of the CARES Act. As a condition of the government funding, Boeing had to refrain from issuing job cuts until the fall – which given the current grim trajectory of the air travel industry, will most likely happen the day after the moratorium expires.
The airplane manufacturing giant has been swimming in controversy since its two infamous plane crashes that killed hundreds of passengers. Following the two disasters, Boeing struggled to regain its footing in the airline industry, but with the onset of the coronavirus pandemic in the spring, it has continued to go downhill from there. So far this year, Boeing has lost over 400 order for its 737 Max. In fact, just the month of July saw a total of 78 cancellations for the troubled airplane.
So far this year, Boeing’s shares have plummeted by approximately 47%, which amounts to a significant drop compared to the Dow Jones Industrial Average.
While Boeing continues to issue job cuts amid the pandemic, the company is also in the works of ending production on several of its major airplanes. The 747 jumbo jet is slated to cease production, while the 787 Dreamliner carries the potential of a consolidation. The manufacturing termination of these airplanes will most likely lead to further job cuts, as overall demand for air travel remains stagnant.
Information for this briefing was found via Boeing and Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.