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Boeing Will Lay Off Nearly 7,000 Workers Due to Coronavirus

By Lou Whiteman – Updated May 27, 2020 at 11:29AM

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The aerospace giant is shrinking as it prepares for an extended slump in new plane sales.

Boeing (BA -2.99%) on Wednesday said it was laying off 6,770 U.S. workers, part of a broader effort to right-size the business and help the company weather the COVID-19 pandemic.

The company said in early April it would offer early retirement and buyout packages to its workforce, part of a broader retrenchment in response to an expected fall in demand for new commercial aircraft. Airlines have seen travel fall to near-zero during the pandemic, and have responded by cutting costs, grounding planes, and putting off expansion plans.

A Boeing Dreamliner 787 landing.

Image source: Boeing.

CEO Dave Calhoun in a letter to employees detailing the cuts said “I wish there were some other way” but the company believes it needs to adjust employment levels based on expected demand.

The COVID-19 pandemic’s devastating impact on the airline industry means a deep cut in the number of commercial jets and services our customers will need over the next few years, which in turn means fewer jobs on our lines and in our offices,” Calhoun wrote. “We have done our very best to project the needs of our commercial airline customers over the next several years as they begin their path to recovery.”

Overall, Boeing intends to shed about 10% of its 160,000 workers worldwide. The Puget Sound Business Journal reported that, overall, Boeing intends to cut 15% to 20% of the company's engineering jobs at commercial hubs in Seattle and Southern California.

About 1,300 union members have applied for buyouts or early retirement, according to Bloomberg, which will account for some of the job losses. Boeing is also reportedly cutting jobs in Canada and Australia as part of the downsizing. Overall, Boeing expects about 5,000 workers to take buyouts.

Although the cuts were expected, they are a fresh reminder to investors that Boeing expects a multiyear recovery in commercial aviation. Airlines are showing early signs of a recovery, but if travel demand does return, the carriers are likely to lean heavily on their existing fleets instead of committing to adding new planes.

While Boeing does have a spare-parts business, there are other aerospace suppliers likely to recover faster than Boeing if the emphasis is on bringing older planes back into service instead of buying new ones.

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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