Boeing announces cuts in production rates for commercial jets

The same day that Boeing announced a $2.4 billion loss for the second quarter that ended in June, the aircraft manufacturer also announced further cuts in aircraft production rates.

The company said the cuts will force further layoffs beyond those previously announced, but did not specify how many people would be affected.

In a message to employees, Boeing CEO Dave Calhoun said customers “are delaying jet purchases, slowing deliveries, deferring elective maintenance, retiring older aircraft and reducing spend — all of which affects our business.”

The previous round of layoffs were announced alongside the first quarter earnings report in April 2020. At that time Boeing said it would lay off 10 percent of its approximately 160,000 worldwide jobs. A large share of those layoffs came in May when 6,700 U.S. workers were let go. Smaller rounds followed. Calhoun said in his July 27 letter that the “latest wave” would start today.

He said Boeing will cut production of its large 777 and new 777X jets to just two jets per month in 2021, one less than previously announced.

Boeing will also delay the new 777X’s entry into service until 2022. The company had previously planned to start deliveries mid 2021.

Boeing CEO David Calhoun announced Boeing will end production if its most iconic aircraft – the Boeing 747 – in 2022. Many airlines have retired their 747 fleets in the past few months as the coronavirus pandemic continues.

Perhaps the most consequential production cut involves the 787 Dreamliner. Boeing will cut production from 10 jets per month to just six per year, starting in 2021. The company had previously announced that production would drop to seven jets per month.

“With this lower rate profile, we will also need to evaluate the most efficient way to produce the 787, including studying the feasibility of consolidating production in one location,” Calhoun said in the letter. “We will share more with you following our study.”

Currently, Boeing produces the Dreamliner in Everett, Wash., and North Charleston, S.C.

The announcement does not bode well for the Everett facility. The larges model – the 787-10 – can only be built in South Carolina because its fuselage section is too large to fit into the Dreamlifter cargo transport that ferries the parts to Washington State.

One advantage that the South Carolina location has over the Washington State facility is union membership. Despite many efforts to organize in South Carolina, the Boeing plant remains union free.

Boeing’s 737 MAX plant will not escape the fallout from COVID-19 either.

Calhoun said that once the FAA certifies the aircraft to return to service, a decision expected this fall, Boeing will ramp up production more slowly than planned.

The new target is to increase production to 31 737 MAX jets per month by early 2022. Boeing had previously expected to reach that goal next year.

Calhoun in the conference call with analysts cited the “geopolitical environment” as a factor in slowing the MAX ramp up. This appears to be a reference to the tensions between the United States and China. Chinese airlines are key customers for the MAX.

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