What will Boeing’s Washington presence look like after crises?
Boeing CEO David Calhoun hinted that the version of the company that returns from the coronavirus and the 737 MAX disasters will not be the same one we see today. That message was quite clear in his letter to employees last week.
Just what might the company look like as it comes out of this?
Global demand for airplanes has plummeted, since airlines are barely flying. We are looking at 70% to 90% flight reductions across the world, aviation insider Jon Ostrower said.
“No airline in the world wants keys to a new aircraft,” he told KIRO Nights. “They are storing airplanes right now as quick as they can. They are retiring older parts of their fleet. They do not want airplanes.”
And Ostrower doesn’t see demand returning to pre-coronavirus forecasts and predictions.
“Demand for airplanes is gone,” he said. “There were large backlogs for these airplanes. The backlogs are still there, but customers are trying to figure out how to get out of them.”
At last check, Boeing still has an order backlog of 5,000 airplanes, but will that be the case as it emerges from the double-whammy of a global drop in demand and the lack of trust in the 737 MAX?
While Boeing is desperate for cash right now, Ostrower said the company is still making deliveries and making some money.
“There is cash coming into this company, not to mention that they are still on the fence on whether they will apply for government grants,” he said. “That could bridge a lot of the workforce benefits and wages.”
But what might be getting lost in all of the COVID-19 discussion is the future of the 787 line in Everett.
Even before the coronavirus hit, customers were pulling away from larger twin-aisle planes. Boeing has scaled back from producing 14 Dreamliners a month to 10; seven of them are produced in South Carolina.
Ostrower said there is a significant discussion going on about closing the 787 line in Everett altogether, and shifting all the work to North Charleston.
“What happens to the Everett line should the rate come down even more?” Ostrower posited. “And the rate is going to come down — that’s very well understood.”
I had a long conversation with a Boeing spokesperson yesterday, and he told me the company is so far from any real discussions about that right now, that it doesn’t really make sense to talk about it. That said, the company said it is committed to both 787 production facilities, citing the significant, long-term investments in the Everett facility.
Will there be production cuts? Yes. Will customers defer orders or stop making payments? Yes. The spokesperson couldn’t talk about future production decisions, but Airbus also cut production by 30% this week.
Boeing is asking for people to take voluntary layoffs. The Wall Street Journal is reporting that the company is hoping to trim the worldwide workforce by 10%.
Commercial airplanes CEO Stan Deal added this in a letter to employees this week.
“While our industry is facing significant pressures today, we remain just as optimistic about the long-term future of commercial aviation. History tells us airlines will play an important role in restoring global trade once the world recovers, and the actions we take today will ensure we are best positioned to support our customers,” the letter reads.