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Boeing Is Laying Off Workers. After Covid-19, the Industry 'Will Likely be Different.' -- Barrons.com

DOW JONES & COMPANY, INC. 9:44 AM ET 4/2/2020

Symbol Last Price Change
BA 125.4413 -5.2587 (-4.02%)
QUOTES AS OF 09:47:08 AM ET 04/02/2020

Commercial aerospace giant Boeing(BA) is taking additional action to protect itself from the fallout from the Covid-19 coronavirus outbreak.

"It will take time for the aerospace industry to recover from the crisis, " CEO Dave Calhoun said in a letter to employees on Thursday. "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." He said the recovery process would take years.

It is a downbeat message. To address the "new reality," Boeing(BA) is offering a voluntary layoff plan. It is essentially a buyout for employees that want to, or can afford to, leave the company.

"This move aims to reduce the need for other workforce actions," Calhoun said. Details of the plan weren't given, including the targeted cost, savings and size of the layoff.

"Boeing(BA) will utilize normal turnover and voluntary employment actions to limit the impact on our people," Boeing(BA) said in a follow up email to Barron's. "The company is identifying highly valued skills necessary for critical programs, and these employees will not be eligible for the program."

Boeing (BA) has about 161,000 employees. About one-third are unionized workers.

In addition to the layoffs, Boeing(BA) recently suspended share buybacks and its dividend. Calhoun, along with board Chairman Larry Kellner, are foregoing pay for the rest of 2020.

There is a lot of debate about what the commercial aerospace industry will look like in a post-coronavirus world.

Roughly half of the global commercial jet fleet is parked. The impact Covid-19 has had on air travel far exceed any other episode in history, including the attacks of 9/11 and the 2002 SARS outbreak. ( SARS was another type of coronavirus.)

Vertical Research Partners analyst Rob Stallard recently wrote that it might take seven years for commercial air traffic to match 2019 levels. Before the crisis, air traffic grew about 5% a year on average. The stability of demand growth -- having more people on planes each year -- made aerospace one of the best-performing industrial end markets, from a stock-market perspective.

Uncertainty, however, will reign in the sector for the foreseeable future. How will business travel ultimately be affected by more videoconferencing? What will the recovery in leisure travel look like? No one has the answers. That fact is reflected in stock prices.

Boeing (BA) shares are down about 50% year to date, worse than comparable drops of the S&P 500 and Dow Jones Industrial Average. Aerospace suppliers that Barron's tracks are also down about 50%l. Stock of airlines, key Boeing(BA) customers, are down almost 60% year to date.

After falling 12.4% Wednesday, Boeing(BA) shares were up 0.5% Thursday morning, in line with the S&P 500.

Write to Al Root at [e-mail]


(END) Dow Jones Newswires
04-02-200944ET
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