Please ensure Javascript is enabled for purposes of website accessibility

Boeing to Cut Widebody Aircraft Production Due to COVID-19 Crunch

By Lou Whiteman – Updated Apr 29, 2020 at 9:21AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Airline demand for new planes is expected to be down for years to come.

Boeing (BA 0.07%) said Wednesday it intends to cut production of its once hot-selling 787 Dreamliner and other twin aisle planes, responding to a dramatic decline in travel demand due to the COVID-19 pandemic.

Boeing will reduce 787 production to a rate of 10 per month in 2020, from 14, and is forecasting seven per month by 2022, while also reducing production on its 777 line to three per month by 2021. The 737 MAX is currently grounded, but assuming it is cleared to resume flying in the second half of 2020, Boeing intends to resume production at a low rate in 2020 and gradually increase to 31 planes per month in 2021.

Prior to its 2019 grounding, Boeing had envisioned a 737 MAX production rate as high as 57 planes per month.

Boeing's widebody fleet on display in an artist rendering.

Image source: Boeing.

"The pandemic is also delivering a body blow to our business — affecting airline customer demand, production continuity and supply chain stability," CEO Dave Calhoun said in a letter to employees. "The demand for commercial airline travel has fallen off a cliff, with U.S. passenger volumes down more than 95% compared to last year."

Calhoun's comments came on the same day that Boeing reported a first quarter loss of $1.70 per share on revenue of $16.9 billion, falling short of consensus expectations for a $1.61 per share loss on revenue of $17.3 billion. Boeing said its total backlog at the end of the quarter stood at $439 billion, including over 5,000 commercial plane orders, but some of those orders could be at risk if air traffic takes years to recover.

Boeing said it is seeking to reduce its total workforce by about 10% through a combination of voluntary layoffs, natural turnover, and "involuntary layoffs as necessary." The cuts will be deeper in areas heavily exposed to the commercial operations, and Calhoun said he hopes to lean on Boeing's $25 billion defense and space units to help cushion the impact of a commercial slide.

"The ongoing stability of our defense, space and related services businesses will help us limit the overall depth of the cut," Calhoun said. "And in the end, because there are so many unpredictable drivers for this crisis, we'll have to monitor continuously what's happening in our markets, and we will make adjustments whenever needed to ensure we're matching the size of our business to the changing demand in the market."

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
BA
$132.20 (0.07%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.