2Q Results Were Tough To Deal With, 747 Officially Killed Off

A letter from Boeing President and CEO Dave Calhoun (pictured) to his employees have addressed the poignant realities of the current COVID-19 pandemic-affected  aerospace market.

Calhoun notes that, "These past few months have been unlike anything we’ve seen. The pandemic’s 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 COVID-19 also have my sympathies.

The reality is the pandemic’s 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."

Among thr specifics noted by his letter is the company's decision to lower commercial airplane production rates.

Boeing will have a slower ramp-up in 737 production than previously planned, with a gradual increase to 31 per month by the beginning of 2022. They will also 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.

787 production rates will be cut 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 will also need to evaluate the most efficient way to produce the 787, including studying the feasibility of consolidating production in one location -- which has raised eyebrows (and concerns) on both coasts.

Boeing also reports that while 767 and 747 rates remain unchanged, in light of the current market dynamics and outlook, they will complete production of the iconic 747 in 2022 -- effectively killing off one of the most powerful aircraft lines in aviation history.

Calhoun mollifies that, slightly, by promising that, "...our customer commitment does not end at delivery, and we’ll continue to support 747 operations and sustainment well into the future."

Previously; Boeing 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 their notifications in May, and Boeing reports that continue to conduct smaller, phased workforce reductions to reach this target.

However; Boeing managers are now communicating the latest wave of those reductions as of Wednesday.

FMI: www.boeing.com