General Electric (NYSE:GE) said Monday it was cutting its aviation workforce by about 10%, part of a broader effort by the company to weather the financial impact of the COVID-19 coronavirus pandemic.
Airlines have been among the hardest hit sectors by the pandemic, with carriers racing to bring down schedules and cut costs due to plummeting travel demand. That's sure to cut into revenue at aerospace suppliers including GE's massive aircraft engine unit.
CEO Larry Culp in a letter to employees released Monday said "the rapid contraction of air travel has resulted in a significant reduction in demand as commercial airlines suspend routes and ground large percentages of their fleets. As a result, GE Aviation is announcing several steps that, while painful, preserve our ability to adapt as the environment continues to evolve."
GE is expecting a "temporary lack of work" impacting about 50% of its U.S. maintenance, repair, and overhaul employees for about 90 days. GE Aviation is also implementing a hiring freeze, cancelling a planned salaried merit increase, and seeking to cut non-essential spending. David Joyce, GE vice chairman and CEO of the aviation unit, will also forgo about half of his salary.
All in, GE expects the moves will preserve $500 million to $1 billion in 2020. Culp said the company's overall financial position is "sound," but warned, "what we don't know about the magnitude and duration of this pandemic still outweighs what we do know."
Culp said he also intends to forgo his full salary for the remainder of the year.
While aviation is likely to be the hardest hit GE business, it is not alone in feeling an impact. Culp said the company's healthcare unit, for example, is seeing reduced demand as elective procedures are postponed or cancelled.
General Electric has had a difficult run in recent years, weighed down by market-topping acquisitions and a huge debt load. The company under Culp showed signs of a recovery in 2019, but that turnaround is likely to be stalled by the ongoing upheaval.