Boeing Co is to suspend most hiring and overtime pay as it works to conserve cash in the face of twin crises over the 737 MAX and a massive slowdown in travel due to COVID-19, the company said on Wednesday.
Shares of Boeing fell more than 18 percent in another bruising day for Wall Street as the company announced the belt-tightening measures after disclosing dozens of MAX plane cancelations.
In addition, sources confirmed that the aviation giant already essentially tapped a US$13 billion loan package finalized just last month.
“It’s critical for any company to preserve cash in challenging periods,” Boeing chief executive David Calhoun wrote in a message to workers.
He said that the company would limit travel and bar overtime except in “critical” cases, and pause new hiring pending a review.
“The year ahead is shaping up to be as challenging for our business as any in the recent past,” the message, which was cosigned by chief financial officer Greg Smith, said.
“On top of the work of safely returning the 737 MAX to service and the financial impact of the pause in MAX production, we’re now facing a global economic disruption generated by the COVID-19 coronavirus,” the message said.
The announcement came as Boeing reported 43 cancelations for the MAX this year as of the end of last month in a monthly update on its Web site.
The company also experienced a big drop in plane deliveries, which stood at 30 at the end of last month, compared with 95 in the same period last year.
Boeing last month reached an agreement with a consortium of large banks for a US$13 billion two-year credit agreement to finance its activities.
Sources confirmed a Bloomberg report that it planned to draw down all of the funds as early as this week.
Carriers around the world have canceled thousands of flights as the coronavirus effectively shuts down key markets like China and Italy, and chills air travel more broadly.
United Airlines Holdings Inc president Scott Kirby on Tuesday said at an investor conference that net bookings to Asia and Europe over the past few days are “now down 100 percent.”
The company has developed contingency plans in case revenue falls 70 percent next month, a scenario it does not expect.
“Based in part on what our experts have told us, as testing expands in the US, many more cases are likely to turn up in many more communities around the country,” Kirby said.
“As such, we’re planning for domestic bookings to deteriorate further in the weeks to come,” he said.
“We’re obviously planning for scenarios that are probably worse than any of you have in your model, we think it will actually be better than that, but it’s better to plan aggressively,” Kirby added.
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