Boeing has announced that it will end production
of the iconic Queen of the Skies - the Boeing 747 - in 2022.
airline manufacturer will also reduce the production rates of its
777/777X to two per month, and 787 to six per month in 2021.
In a letter to employees on Wednesday, Boeing
President and CEO Dave Calhoun, wrote, "These past few months have
been unlike anything weíve seen. The pandemicís effect on our
communities and industry is ongoing. And the challenges we face as
a company are still unfolding. As cases continue to rise in areas
around the globe, health and safety remain a top priority. My
thanks go to everyone who is supporting our safety efforts,
wearing face coverings and upholding our shared accountability for
keeping one another safe. All those affected directly by COVID19
also have my sympathies.
"The reality is the pandemicís impact on the
aviation sector continues to be severe. Though some fliers are
returning slowly to the air, their numbers remain far lower than
2019, with airline revenues likewise reduced. This pressure on our
commercial customers means they are delaying jet purchases,
slowing deliveries, deferring elective maintenance, retiring older
aircraft and reducing spend - all of which affects our business
and, ultimately, our bottom line. While there have been some
encouraging signs, we estimate it will take around three years to
return to 2019 passenger levels.
"Thatís why weíve been taking decisive actions. To
bolster our near-term liquidity, we suspended our dividend,
terminated our share repurchasing program, reduced discretionary
spending and overhead costs, and issued $25 billion in new debt.
"While these steps help us navigate the pandemic,
they donít change the fact that the commercial marketplace is
different, and we must change with it. To align to a smaller
market, we lowered commercial production rates and took tough
workforce actions throughout the quarter. Unfortunately, itís become clear that we need to
make further adjustments based on the prolonged impact of COVID19."
Part of the measures include:
- A slower ramp-up in 737 production
than previously planned, with a gradual increase to 31 per month
by the beginning of 2022.
- Reduce the combined 777/777X production
rate to two per month in 2021, which is one unit lower per month
than Boeing announced last quarter.
- Further reduce 787 production to six per
month in 2021. This is an adjustment down from the reduction
announced last quarter to 10 per month currently and seven per
month by 2022. With this lower rate profile, Boeing says that it will
also need to evaluate the most efficient way to produce the 787,
including studying the feasibility of consolidating production in
- While Boeing's 767 and 747 rates remain
unchanged, Boeing will end production of the iconic 747 in 2022.
The company will however continue to support
747 operations and sustainment well into the future.
In the letter, Mr. Calhoun also warned that the
company may be forced to make further layoffs.
"As you know, we previously announced a net 10%
workforce reduction in 2020 through a combination of voluntary
layoffs, attrition and involuntary layoffs (ILOs) to align to a
smaller market. The first wave of associates affected by ILOs
received notification in May, and we continue to conduct smaller,
phased workforce reductions to reach this target. Managers are
communicating the latest wave of those reductions beginning
today," Mr. Calhoun said. "Regretfully, the prolonged impact of COVID19
causing further reductions in our production rates and lower
demand for commercial services means weíll have to further assess
the size of our workforce. This is difficult news, and I know it
adds uncertainty during an already challenging time. We will try
to limit the impact on our people as much as possible going
forward. And as always, we will communicate openly, honestly and
transparently with you."
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