Boeing (BA 3.10%), ravaged in 2020 due to the coronavirus pandemic and the 737 MAX crisis, is suspending annual merit salary increases heading into 2021. But the company hopes to make up for the lost pay by awarding employees a one-time grant of restricted stock.
The aerospace giant saw its shares fall by nearly 75% in the early months of the pandemic as it became clear airlines would be among the hardest-hit sectors.
Boeing has cut aircraft production and intends to eliminate about 30,000 jobs. And CEO Dave Calhoun, in a letter to employees Wednesday, said the merit increases are suspended as part of an effort to take "proactive action to position our company to be leaner and more agile as the market recovers."
The stock grants, which will be awarded to about 82,000 nonexecutive workers not covered by a union contract, will vest three years from the grant date.
"We will continue to position our company for the long term and chart a course to the other side of the recovery by making smart bets and investments," Calhoun said. "That starts with investing in our people, empowering them to make the changes that will transform our company, and sharing in our successes, together."
In April, Boeing put to rest questions about its viability by raising $25 billion in new debt, but the company is now saddled with more than $60 billion in debt. The company earlier this month said it will prioritize paying down that debt in the quarters to come, and could even issue new shares to try to raise money to support that effort.
The decision is unlikely to be popular with employees, but with Boeing's stock still off by 33% year to date, the payoff for employees could potentially be much more significant than a merit increase if the stock recovers in the next three years. The move is also relatively shareholder friendly, as it aligns employees' interests with those of investors.