Boeing makes deeper job cuts as risk of sales downturn looms

Boeing is making deeper job cuts in its commercial airplane business and planning further reductions for 2017, citing “fewer sales opportunities and tough competition.”

The US planemaker will trim the workforce in its largest division by 8 per cent by the end of this year compared with the January level, Boeing Vice Chairman Ray Conner and Kevin McAllister, chief executive officer of the jetliner unit, said in a memo to employees Monday.

That implies a reduction of about 6,600 jobs based on employment on January 28. In March, the company said it expected to cut 4,000.

Boeing and Airbus Group SE have been streamlining their operations as dwindling airplane sales heighten concern that the aerospace industry is slipping into a down cycle. The US planemaker said earlier this month that it would slow production of the 777, one of its biggest moneymakers, in August 2017 even after a previously announced reduction in output takes effect next month.

“We will need to continue to reduce the size of our workforce next year,” Conner and McAllister said. While some cuts will come from attrition, voluntary layoffs and leaving open positions unfilled, “we may also need to use involuntary layoffs.”

Boeing rose 1.2 per cent to US$156.40 in New York. The shares climbed 6.9 per cent this year through December 16, trailing the 10 per cent gain for the S&P 500 Index.

There is no specific target for the number of 2017 job cuts, a spokesman for Chicago-based Boeing said. This year’s reductions include a 10 per cent reduction in executives and managers, said Conner and McAllister. Boeing is also “working aggressively” to trim non-labour costs, they said.

McAllister became the first outsider to run the commercial airplane unit last month, joining Boeing company from General Electric Co. He succeeded Conner.

Production of the 777 will slow to five aircraft a month starting in August 2017 and some jobs will have to be eliminated, Boeing told employees last week. The latest cut came as suppliers were already girding for a previously announced slowdown to a monthly pace of seven jets at the start of next year.

Boeing currently makes the wide-body planes at an average pace of 8.3 a month.

Demand for twin-aisle jets has been sapped by a glut of used Boeing 777 and Airbus A330 models. Cheap oil and economic turmoil give airlines less incentive to trade in middle-aged models for pricey new fuel-efficient ones.