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Boeing Says It Will Take Around 3 Years To Return To 2019 Passenger Levels

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Dave Calhoun, President and CEO of Boeing, Inc., said he estimates that it will take around three years to return to 2019 passenger levels, though there have been some encouraging signs. He said this in a letter to employees on the aerospace market realities.

As health and safety remain a top priority, Calhoun said the COVID-19 pandemic's impact on the aviation sector continues to be severe, with airline revenues reducing. This has led to Boeing's commercial customers delaying jet purchases, slowing deliveries, deferring elective maintenance, retiring older aircraft and reducing spend, he added.

In view of the current market conditions, Boeing has been taking decisive actions to bolster near-term liquidity by suspending dividend, terminating share repurchasing program, reducing discretionary spending and overhead costs, and issuing $25 billion in new debt.

Boeing has also lowered commercial production rates and announced a net 10 percent workforce reduction in 2020 through a combination of voluntary layoffs, attrition and involuntary layoffs (ILOs) to align to a smaller market.

Calhoun said Boeing will further lower their commercial airplane production rates to make further adjustments based on the prolonged impact of COVID-19. It will need to adapt accordingly as the market will not support higher output levels at this time.

The aircraft maker will now slow down the ramp-up in 737 production than previously planned, with a gradual increase to 31 per month by the beginning of 2022. It will also reduce the combined 777/777X production rate to two per month in 2021 and 787 production rate to six per month in 2021.

With this lower rate profile, Calhoun said Boeing will also need to evaluate the most efficient way to produce the 787, including studying the feasibility of consolidating production in one location.

While the 767 and 747 rates remain unchanged, Boeing will complete production of the iconic 747 in 2022 based on the current market dynamics and outlook.

Calhoun noted that the prolonged impact of COVID-19 has needed further reductions in production rates and this would also require a further assessment of the size of Boeing's workforce.

However, he added that the diversity of Boeing's portfolio and its government services, defense and space programs provide some stability in the near term as it takes these tough but necessary steps.

Boeing continues to proactively review every aspect of its operations to identify opportunities to improve and align better to the new market conditions. These include its infrastructure footprint, overhead and organizational structure, portfolio and investments, supply chain health and stability, and its ability to drive operational excellence.

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