We are currently living through what is undoubtedly a historic moment, both for humanity, and aviation. COVID-19 has now taken over 200,000 lives and infected over 3,000,000 people - likely many more. The world will obviously be changed forever. However yesterday, Boeing CEO Dave Calhoun warned shareholders how severe the implications of this pandemic will be – with numbers expected to "take two or three years for travel to return to 2019 levels and an additional few years beyond that for the industry’s long-term trend growth to return."
Boeing 737 MAX landing after a test flight. Photo by Preston Fiedler | AeroNewsX
Boeing has already suffered recently, with the 737 MAX crisis, and 777X still in development. Furthermore, due to the clearly unstable situation that airlines currently find themselves in, it’ll be unlikely that most will be able to fulfil large orders for the airframes, for example Emirates’ order for 126 777Xs.
In the shorter term, voluntary and involuntary layoffs, and natural turnovers are on the cards in a bid to reduce employee numbers by an estimated 10%. This is in addition to a dramatically reduced aircraft production rate announced on Wednesday, with a plan to reduce the 787 production rate to 10 per month in 2020 and 7 per month by 2022. The combined 777 and 777X production rate is also to be scaled down to 3 per month in 2021, while the 747's and 767's production rates will not change. The only aircraft expected to have an increase in its production rate is the 737 MAX, rising to 31 per month in 2021.
Calhoun describes the situation as ‘unlike anything we have ever experienced’ as airlines are ‘grounding fleets, deferring airplane orders, postponing acceptance of completed orders, and slowing down or stopping payments.’ Indeed, AeroNewsX has been reporting on the various difficulties airlines globally have been facing, with Virgin Atlantic now looking for a buyer, South African Airways on the brink of collapse and even giants such as Delta posting historic losses (US$422m first quarter loss this year).
Furthermore, Calhoun mentioned Boeing’s relationship with Embraer and outlined that they are no longer looking to purchase Embraer’s commercial jet operation, in a move which followed Airbus’ stake purchase in the Bombardier CS program, saving it from certain demise. Unsurprisingly, Embraer reacted with an announcement that it had begun arbitration proceedings, with Boeing of course maintaining that it will not pay a termination fee.
COVID-19 is also likely to change how we design aircraft and airports forever, because although we were always aware of the risks presented by recirculated air being spread across the cabin, and the ability it has to spread disease, now that this issue is laid bare in the public eye, and governments globally wake up to the health threat, there will almost certainly be a wide range of new legislation, protecting sanitation and cleanliness onboard aircraft, which aren’t the cleanest at the best of times.
Boeing is now certainly in survival mode. Calhoun has said "it will be years" until dividends are paid to shareholders again, and that heavy borrowing would have to take place over the next 6 months, the payment of which will be the priority. This combined with the attempted re-certification of the 737 MAX most likely falling to late summer, production rate dropping and workers being laid off, it just shows how even the mightiest of players in the aviation business feel the effects of change just like everyone else.