According to the CEO of United States based aircraft maker Boeing has warned that the global airline and the aerospace industry will take years to recoup from the bit of the coronavirus pandemic and has therefore offered its employees buyouts.
Voluntary layoff packages with pay and benefits for exiting employees is being offered by the company, Boeing CEO Dave Calhoun said in a memo to its employees. The company is doing so “to reduce the need for other workforce actions”, Calhoun said.
At the beginning of the year, there were about 161,000 people employed at Boeing and about one third of them are members are represented by worker’s unions.
In addition to the business hit because of the global grounding of the 737 Max aircraft following to deadly crashes, Boeing has also been hit hard by the virus pandemic. Travel bans across the globe because of the pandemic has resulted in virtual disappearing of revenues for airlines around the globe and have been forced to implement deep cost cutting and capital spending – including purchase of new aircraft.
“One thing is already clear: It will take time for the aerospace industry to recover from the crisis,” Calhoun said in the memo. “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 wrote.
“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.”
A $50 billion bailout for US airlines was included in the $2 trillion stimulus bill that was passed by US Congress last week. However the majority of the revenues generated by Boeing are from sale of its planes to airlines elsewhere in the world. Analysts have said that while other countries could also announce bailout packages for airlines in other countries, how much of help to the airlines would be available is not clear. While analysts expect that some airlines will most probably have to shut down business completely, others will either delay or cancel delivery of new planes that had already been ordered.
At the beginning of the current year, Boeing had a backorder of 5,350 commercial jets which meant that the company’s production line could have been operational for years to come as the company is able to only churn out about 800 planes a year. However the problem for Boeing is that about 4,000 of the backorders are from airlines outside of the United States.
The crisis period of Boeing started March last year with the global grounding of all of its 737 Max planes following two deadly crashes involving the planes within five months of each other. The two crashes killed a total of 346 people.
(Adapted from CNN.com)