Aircraft manufacturing giant Boeing has offered its employees buyouts as it forecasts recovery from the coronavirus pandemic to take years.
Boeing is forecasting the airline and aerospace industry’s recovery from the coronavirus pandemic to take years and offered buyouts to employees as an option. The offer was announced via memo to employees from Boeing chief executive officer (CEO) Dave Calhoun.
According to Calhoun, the company is offering voluntary layoff packages that provide exiting employees with pay and benefits in order “to reduce the need for other workforce actions.”
The aircraft maker has been impacted greatly by the coronavirus outbreak as airlines around the world were forced to cut costs as revenues decline, which included aircraft purchases.
At the beginning of 2020, Boeing had 161,000 employees, with about a third beingrepresented by unions.
In the memo, Calhoun said: “One thing is already clear: It will take time for the aerospace industry to recover from the crisis. When the world emerges from the pandemic, the size of the commercial market and the types of products and services our customers want and need will likely be different.”
“We will need to balance the supply and demand accordingly as the industry goes through the recovery process for years to come. It’s important we start adjusting to our new reality now,” he explained.
While the US Congress has passed a $2 trillion stimulus bill, which included a $50 billion bailout for US airlines, most of Boeing’s sales come from airlines elsewhere in the world. There is uncertainty whether bailouts would be available in those countries.
The company began the year with a backorder of 5,350 commercial jets, which could have kept its factories running for years since it can only complete 800 jets on average annually. However, over 4,000 of those orders were from airlines outside the US.
Under the US government stimulus, Boeing is eligible for loan guarantees. It has also taken initiatives to preserve cash, including suspending its dividend payments for the first time since 1942. In 2019, the company paid out $4.6 billion in dividends.
In February, it arranged for a loan of $13.8 billion from a syndicate of major banks in February and drew the money last month.
In January, Boeing recorded a $636 million loss for 2019, the first in more than 20 years, as it felt the effects of the 737 Max groundings. This was after the company posted worse than expected sales in the final three months of last year.
The aircraft maker registered $17.9 billion in revenues during the fourth quarter of 2019, which was lower than the $21.7 billion.
Boeing entered the coronavirus while dealing with its own crisis regarding its best-selling jet, the 737 Max.
The Boeing 737 Max planes were grounded globally in March 2019 following two fatal crashes that killed 346 people. Since its grounding, there were no orders for the 737 Max until last month that Boeing recorded its first new orders, a total of only 30 planes.
To make things worse, the company discovered another potential flaw in the design of the aircraft following a December safety audit ordered by the US Federal Aviation Administration (FAA).