Boeing told employees Wednesday that almost 7,000 of them will receive layoff notices this week. With more than 5,500 voluntary buyouts added in, the company will slash almost 12,300 U.S. jobs in this first batch of cuts stemming from the coronavirus economic shock.
Washington state takes the biggest hit: 9,840 Boeing jobs will be cut before July 31 in a combination of buyouts and involuntary layoffs, the company said.
“We have come to the unfortunate moment of having to start involuntary layoffs,” CEO Dave Calhoun said in a message to all employees. “We’re notifying the first 6,770 of our U.S. team members this week that they will be affected.”
He said the “devastating impact” of the spread of COVID-19 on the airline industry translates into “a deep cut in the number of commercial jets and services our customers will need over the next few years, which in turn means fewer jobs on our lines and in our offices.”
“I wish there were some other way,” he added.
Those U.S. job losses add to 400 layoff notices announced last week at Boeing’s parts fabrication plant in Winnipeg, Canada, and 230 earlier this month at its manufacturing plant in Melbourne, Australia — bringing the companywide workforce reduction to just shy of 13,000 people.
Wednesday’s is the first and largest cut in the U.S., but there is more to come. Boeing earlier said it plans to cut about 16,000 jobs total due to the dramatic falloff in airline business.
A Boeing spokesman said Wednesday that “it will take some time for the company to reduce our workforce by the approximately 10% we announced.”
“Today’s numbers represent the largest segment of layoffs. The several thousand remaining layoffs will come in additional tranches over the next few months,” he said.
Economists said the impacts of the layoffs on the regional economy may be hard to discern in the near term, given the aerospace sector’s declining share of jobs in a region already hit by hundreds of thousands of pandemic-driven layoffs.
“The impact of the Boeing layoffs will be very hard to identify on its own, given everything else that is happening,” said Hart Hodges, co-director of the Center for Economic and Business Research at Western Washington University.
But with the pandemic threatening to sharply reduce the global aviation sector for the next several years, Boeing’s contraction could prove more than a short-term dip.
Thomas Gilbert, associate professor of finance at the University of Washington Foster School of Business, said many of the cuts will be in high-wage, high-skill jobs, and could leave their mark both on personal careers and the broader economy.
“If these workers leave the labor force permanently, their skills will atrophy quickly and they will probably never work at the same level again,” said Gilbert. “This is a permanent loss to our economy.”
In an unhappy coincidence for Boeing, the Times of India on Wednesday featured a story describing the company’s plans to expand employment in India.
The paper quotes Salil Gupte, president of Boeing India, touting the jetmaker’s new $200 million engineering and technology campus going up in Bengaluru, which he says will make Boeing’s India operations “the largest outside of the U.S.”
Boeing had previously announced sharp reductions in airplane production plans.
The 787 Dreamliner’s production was cut from 14 per month to 10 per month this year, and will drop to seven per month by 2022. Production of the 777 and 777X will be cut to three per month from the current five a month.
And previous optimistic plans to quickly boost production of the 737 MAX to 42 jets per month, just months after it gets clearance to fly again, have been abandoned. The plan now is to raise the rate to 31 planes per month sometime next year.
Those rate cuts mean job losses beyond Boeing itself. The impact will reverberate throughout the local aerospace supply chain.
“Everything that affects Boeing also impacts their suppliers,” said Anneliese Vance-Sherman, a regional economist at the state Employment Security Department who covers the Seattle area. “If you look at our [recent layoff] notices, you’ll see that there has been an uptick … from advanced manufacturing in the past several weeks.”
In his message Wednesday, Calhoun told the employees who will keep their jobs that “enormous challenges remain” and that Boeing “will have to adjust our business plans constantly until the global pandemic stops whipsawing our markets in ways that are still hard to predict.”
Laying out the priorities to steady the business, he listed keeping employees healthy and safe, supporting airline customers and Boeing suppliers through the recovery, and working with airlines “to assure the traveling public that it can fly safe from infection.”
He said the defense and space side of Boeing’s business remains strong. And despite the collapse in demand for passenger jets, he said the commercial airplanes division will move forward “with our plan to restart 737 MAX production in Renton.”
The MAX has been grounded for almost 15 months following two deadly crashes. Boeing is continuing its efforts to get the plane — updated with modified flight control systems — recertified and back into service later this year.
As the MAX grounding hit its finances last year, Boeing borrowed heavily to tide it over, increasing its debt by $13.4 billion. In the first three months of this year, Boeing was forced to borrow more, increasing its debt by another $11.6 billion. At the end of March, its total debt stood at $38.9 billion.
All of that money was borrowed from private commercial markets. Calhoun declined to take relief money directly from the government, in part because that could have had strings attached restricting the company’s freedom to make less politically acceptable business moves — such as layoffs.
As he delivered the bad news, Calhoun tried to offer some hope, writing that he’s seeing “some green shoots,” meaning the beginning of regrowth in the worldwide airline economy.
“Some of our customers are reporting that reservations are outpacing cancellations on their flights for the first time since the pandemic started. Some countries and U.S. states are starting cautiously to open their economies again,” Calhoun wrote.
“But these signs of eventual recovery do not mean the global health and economic crisis is over,” he added. “Our industry will come back, but it will take some years to return to what it was just two months ago.”