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Boeing CEO says voluntary layoffs are on the way to adjust to ‘our new reality’ in hard-hit airplane market

Alan Boyle
Boeing has been dealing with the worldwide grounding of its 737 MAX planes as well as the economic effects of the coronavirus pandemic. (GeekWire Photo)

Boeing CEO David Calhoun says the company is preparing a voluntary layoff program that’s aimed at reducing the need for “other workforce actions” as it deals with the economic repercussions of the coronavirus pandemic.

In a letter sent to employees, Calhoun said details about how the program works will be laid out in the next three to four weeks. Speaking on background, a Boeing official said several thousand employees are expected to take the voluntary layoff package or retire.

For the past year, Boeing has been struggling with the worldwide grounding of its 737 MAX passenger jets in the wake of two catastrophic crashes. The company was targeting the middle of this year to resolve all the safety issues and win the Federal Aviation Administration’s go-ahead to put the planes back into operation.

Then the pandemic hit. Last month, reports emerged about COVID-19 cases — and at least one death — among employees at Boeing’s production facilities in the Puget Sound region. Those facilities are now in the middle of a 14-day shutdown while Boeing conducts deep-cleaning operations at the plants and assesses the wider impact of the coronavirus outbreak.

Calhoun said Boeing was “doing everything possible to keep this team intact” during the pandemic.

“But 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,” he told employees.

“It’s important we start adjusting to our new reality now,” he wrote.

The voluntary layoff plan would let eligible employees who want to leave the company to do so with a pay and benefits package, he said. At the same time, Boeing will continue to recruit in areas where personnel are needed to meet customer commitments, he said.

Specifics about the areas to be affected by voluntary layoffs weren’t provided, but Calhoun’s reference to the commercial airplane market suggests that Boeing Commercial Airplanes will be on the list.

Bloomberg News quoted an unnamed source as saying Boeing is taking a closer look at manufacturing rates for wide-body jets due to plunging demand. We’ve reached out to Boeing for details and will update this report with anything we can add on that score.

Last month, Boeing said it was looking for $60 billion in public and private assistance to weather the economic effects of the pandemic. A $2 trillion economic relief package that was signed into law last week includes a $17 billion loan program for which Boeing may be eligible, but it’s not yet clear how much the company will receive from that program or other federal aid.

Boeing Commercial Airplanes went through rounds of layoffs in 2017 that reduced its workforce by more than 10 percent, as part an effort to stay cost-competitive with Airbus, its European rival. By 2019, Boeing’s total employee count had recovered to more than 160,000, the level it was at in 2015.

Boeing’s share price dropped 5.65% today to finish the session at $123.27.

Update for 2:30 p.m. PT April 2: We’ve updated this report with Boeing’s expectations for how many will retire or volunteer for layoff, plus Boeing’s closing share price.

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