Boeing slashes jet output, eyes factory shake-up as COVID-19 hammers sales

Reuters

(Reuters) — Boeing Co (BA.N) slashed production of its biggest twin-engined jets, delayed its new 777X by up to a year and began sunsetting the iconic 747 as it posted a bigger-than-expected quarterly loss dominated by the COVID pandemic on Wednesday.

The cuts mark the industry’s latest effort to tackle a crisis that has decimated demand for air travel, with oversupplied wide-body models like the 787 Dreamliner and 777 plunging deeper into an existing downturn.

Boeing also remains exposed to tensions between the United States and China, which has shelved plans to buy big U.S. jets.

“Our industry and our company are weathering challenges like none we have ever experienced in our lifetimes,” Chief Executive Dave Calhoun told analysts.

Boeing said it would cut 787 output to six a month in 2021 — down from a previous goal of seven and the third such cut since a year ago when output touched a record 14 a month.

It also plans to cut combined output of the 777 mini-jumbo and its new 777X sister model to two a month in 2021 from a previous goal of three, while delaying the 777X entry to service by a year to 2022, confirming a Reuters report.

Boeing shares fell 3% partly on the lower production, though analysts said it had managed to contain its cash burn, a central concern for investors.

Boeing lost an adjusted $4.79 per share, against average estimates of a loss of $2.54, according to Refinitiv IBES data.

The commercial airplanes unit was hit by $468 million in severance expenses related to plans to cut 19,000 jobs of its roughly 160,000 workforce and Boeing warned deeper cuts were possible.

“We’ll have to further assess the size of our workforce,” Calhoun told employees.

The financial impact of the health crisis has compounded the safety grounding of Boeing’s narrow-body 737 MAX 16 months ago.

Calhoun told analysts MAX deliveries would resume in the fourth quarter, a fresh delay of several weeks that raises the prospect that its U.S. return to service could slip into 2021.

Boeing also slowed plans to lift battered MAX production, by pushing its target of 31 jets a month into 2022 from 2021.

“We still see a path to positive cash flow in 2021,” CFO Greg Smith added, noting it would take a year after MAX deliveries begin to clear a backlog of around 450 parked jets.

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Source: Ankit Ajmera, Eric M. Johnson | Reuters

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