Boeing Forced To Cut Jobs As Competition And Weak Market Stifles Growth

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BA: The Boeing Company logo
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The Boeing Company

Boeing (NYSE:BA) recently announced its plans to cut many more jobs in 2017. In 2016, the company shaved its commercial segment workforce by close to 8%. However, the aerospace giant has mentioned that it will start by leaving open positions vacant and offering voluntary buyouts. It plans to employ layoffs only as a last resort. Boeing and its main rival Airbus, have been plagued by a slowing commercial airplane market. This has increased pressure on both to lower prices on their jetliners to win deals. Consequently, this has led to major cost cutting internally and with suppliers in an attempt to preserve their profit margins.

Last March, Boeing had announced plans to cut about 4,000 jobs during the year, in response to sluggish sales. However, conditions worsened as the year progressed and by the end of November, the company had laid off close to 6,115 employees. The company is now expected to have cut close to 8% of its workforce in the year just ended. This new target is almost 57% higher than the forecast given back in March. This number is testament to the fact that things are only getting worse for both Boeing, and its main rival Airbus.

As mentioned previously, commercial orders have been in quite a slump this year. Boeing’s deliveries have fallen considerably over the last two years and will continue to do so considering the current economic environment. The weak economy has forced air carriers and governments to delay or cancel orders for new aircraft, including the flagship 787 Dreamliner. Furthermore, airliners built more than 20 to 30 years ago are still flying regular routes after being refurbished multiple times. In an earlier statement, management had hinted at pushing production of the Dreamliner from 12 to 14. It seems likely that won’t happen immediately, affecting job creation possibilities. So far, the company has managed to only sell 558 planes. This is a whopping 35.7% drop in sales year over year.

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The announcement comes days after Boeing finalized a deal with Iran to supply the country with 80 airplanes. The deal covers the sale of 15 777-300ER long-haul jets and 15 of the newer 777X widebody aircraft which is currently under development. Apart from this, the deal also includes the sale of about 50 737MAX single-aisle jets. Despite this order win, Boeing has decided to cut the production of the current 777 aircraft to just 5 planes a month. This will definitely lead to a loss of jobs in the program.

Boeing’s commercial unit started 2016 with more than 82,500 jobs, mostly in Washington state. As of November 24, employment had fallen to around 77,400 according to the most recent data available. By the looks of things, it seems plausible that this number could shrink even further in 2017 without a revival in aircraft orders.

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