Boeing announced another round of voluntary layoffs for this year offering workers a package with pay and benefits, as the ailing planemaker grapples with the financial fallout of an almost complete halt in global air travel induced by the coronavirus pandemic.
Boeing (BA) said that the layoff package will be offered to employees in the commercial airplanes and services businesses as well as those in corporate functions, CEO Dave Calhoun wrote in a note to employees, seen by Reuters.
“Unfortunately, layoffs are a hard but necessary step to align to our new reality, preserve liquidity and position ourselves for the eventual return to growth,” Calhoun said in the note. “We anticipate seeing a significantly smaller marketplace over the next three years.”
The company doesn’t have a set target at this time and was encouraging all eligible employees interested in the voluntary layoff package to apply, Boeing said.
More details will be made available to the employees beginning Aug. 24, according to the CEO’s note.
The move to extend the overall workforce reductions beyond the initial 10% target is in response to employee feedback, Calhoun said. Back in April, Boeing announced a plan to cut its 160,000-person workforce by about 10%, most of which was to be completed by the end of this year at its commercial aircraft division.
The coronavirus travel restrictions have resulted in a deep cut in the number of commercial jets and services Boeing customers need over the next few years. As such, global airlines suffering billions of dollars in losses have been seeking to cancel or delay some of the orders they have with Boeing. As of the end of July, Boeing lost a total of 836 plane orders this year, while also taking a hit from last year’s grounding of the 737 MAX aircraft following two fatal crashes.
Shares in BA have plunged 47% year-to-date, but analysts have a cautiously optimistic Moderate Buy consensus on the stock. That’s with a $187.63 average analyst price target (9% upside potential).
Merrill Lynch analyst Ronald Epstein recently cut the stock’s price target to $175 from $195 and reiterated a Hold rating, saying that the focus on cost-reduction and cash-flow generation is not enough to show investors that the company can “successfully navigate the turbulence in commercial aviation”. (See Boeing’s stock analysis on TipRanks).
“In our view, the emerging crisis in investor confidence is justified,” Epstein wrote in a note to investors adding that Boeing should focus on “ensuring safety through a return to engineering excellence and investing for the future of commercial aerospace”.
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