Boeing deepens job cuts as profit tumbles on 737 MAX, Covid-19 crises

Boeing Co reported its fourth straight quarterly loss on Wednesday as the coronavirus pandemic and 737 MAX grounding continued to hammer sales, while reaffirming its expectation that US deliveries of the jet would resume before year-end.

The US plane maker also said it was sticking with the deeply reduced twin-aisle production rates announced in July, as well as the goal to hit a build rate of 31 narrow bodies monthly in early 2022.

The Covid-19 pandemic has brought air travel to a near halt, pushing major airlines to the brink of bankruptcy and forcing them to seek government aid, cut costs and defer aircraft deliveries - when Boeing gets paid most of the money for new jets.

"While losing money and burning through over $5 billion in three months is hardly good news, at least it wasn't worse than this," Vertical Research Partners analyst Rob Stallard wrote in a note.

Boeing Chief Executive Dave Calhoun said during a CNBC interview the company was nearing the finish line on winning 737 MAX approval, and expects airline traffic to end the year at around 30-35 per cent of 2019 levels.

Boeing estimates a full return to pre-pandemic levels in about three years, in line with other industry estimates.

As a result of the downturn, Boeing has slashed production, shed thousands of jobs and shifted its jet development strategy, while working to emerge from the depths of the pandemic and the 19-month-old worldwide 737 MAX ban triggered by two fatal accidents.

The US Federal Aviation Administration was expected to lift its March 2019 grounding order on the 737 MAX as soon as next month, pending approval of software and training changes, meaning the jet could return to service in 2021.

As Boeing scrambles to cut costs, Calhoun told employees in a memo on Wednesday Boeing now expects to eliminate some 30,000 jobs through buyouts, layoffs and attrition - nearly double what it initially planned - for a global workforce of around 130,000 by end-2021.

Boeing also announced a $67 million charge in the quarter on its KC-46 aerial refueling tanker program, which Boeing attributed to Covid-19 disruptions and production issues.
 

The company's free cash outflow rose to $5.08 billion in the quarter, from $2.89 billion, a year earlier, while total debt jumped to $61 billion, from $19.2 billion.

"With the 737 MAX inching closer to return to service around year-end, we do not expect Boeing to back away from targets for positive free cash flow in 2021 and delivering more than 50 per cent of the 737 MAXs in inventory," JP Morgan analyst Seth Seifman said.

Excluding items, Boeing lost $1.39 per share, less than the Wall Street's average expectation of a loss of $2.52 per share, according to IBES estimates from Refinitiv.

Revenue fell 29 per cent to $14.14 billion, but topped analysts' estimate of $13.90 billion.

Shares were down 1.2 per cent in early trade.