Boeing plans to announce significant rollbacks in the production of the 787 Dreamliner along with a number of job cuts next week. This news comes as the global airline industry is in freefall and demand for new aircraft is at an all-time low. These production cuts will bring down monthly production to just a handful of aircraft.
More difficult times ahead
Boeing will cut the production of the 787 by roughly 50% percent, bringing down its 14 aircraft a month to figures in the single digits. This reduction is even lower than Boeing’s earlier planned production cuts to 10 aircraft a month.
Boeing was also forced to temporarily close many of its facilities over virus concerns. The move comes in response to the coronavirus, which had forced companies to defer aircraft deliveries and cancel orders outright, heavily impacting Boeing.
In an open letter to employees, Boeing CEO David Calhoun speaks about how “it’s important we start adjusting to our new reality now”. The letter also mentions that Boeing will likely take years to recover from this pandemic as the aviation market continues to shrink.
The aircraft manufacturer has previously considered axing 10% of the entire workforce. All of this points to a significant overhaul at Boeing, which will likely see thousands of jobs lost and production cut across the board.
Turbulent times for the industry
The 787 is one of Boeing’s most popular widebody aircraft and has racked up over 1500 orders since 2004. However, with the airline industry expected to lose nearly $314bn in revenues this year, there is little appetite for big aircraft orders. Boeing, and competitor Airbus, have burnt through record levels of cash and are now looking for government support.
According to analytics company Cirium, roughly 64% of the global airline fleet has been parked. The number of daily flights has also plummeted, down to just under 19,000 flights worldwide. These statistics show just how badly the aviation industry has been hit by the coronavirus, and indicates potentially how long the road to recovery will be.
It is safe to say that Boeing has had its fair share of troubles in the past year. The grounding, and subsequent array of issues with the 737 MAX has severely damaged the company’s reputation and financial standing. The airline has also seen net negative order months, where it has lost more orders than received.
However, it will be the next few months that will be crucial for Boeing. The company faces a number of hurdles: cutting costs, recertification flights for the 737 MAX, and rolling out the 777X. It will have to do this against the backdrop of a global pandemic, which is eating away as its reserves and reshaping the entire industry. We will be closely watching Boeing to see how it confronts its newest, and possibly biggest, challenge ever.
What do you think of Boeing’s plans to cut production capacity? How will the company fare in the long run? Let us know in the comments below.