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Boeing Initiates Voluntary Layoff Plan, Sees "New Reality" Post-Coronavirus

By Lou Whiteman – Apr 2, 2020 at 11:49AM

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The company does not see new jet demand bouncing back quickly.

Boeing (BA -0.96%) is offering early retirement and buyout packages to its workforce, part of the aerospace giant's effort to retrench as the COVID-19 coronavirus pandemic saps demand for air travel and with it the need for new jets.

Shares of Boeing lost nearly half their value in March as airlines scrambled to cut flights, ground planes, and freeze spending. It's likely some of those older planes will never fly again, but if the pandemic causes the U.S. economy to fall into a deep recession, it will likely be some time before they are replaced by newer jets made by Boeing and archrival Airbus.

A Boeing 737 MAX airborne over the clouds.

Image source: Boeing.

Boeing has suspended its dividend, temporarily shut down aircraft production, and has taken other steps to cut costs, but CEO Dave Calhoun in a memo to employees said, "It will take time for the aerospace industry to recover from the crisis."

"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," Calhoun wrote. "It's important we start adjusting to our new reality now."

Boeing's struggles started well before the pandemic, with the company's much-anticipated 737 MAX jet grounded in March 2019 following a pair of fatal accidents. The company said it remains on track to get the MAX airborne by mid-year, but it is unclear whether airline demand for the plane will match Boeing's 4,000-plus unit order book.

The company had already anticipated slowing demand for larger widebody aircraft, and it had planned previously to reduce the number of 787 Dreamliners coming off the assembly line in 2021.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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