Boeing Cutting 4500 Jobs

First the Miserable Pacific Northwest Weather...and Now This!

The Boeing Company (BA - Analyst Report) released its annual orders and deliveries information last Thursday. Net orders (i.e., orders adjusted for current-year cancellations and conversions) for 2008 were 662 shipsets, consisting of 484 737s, 3 747s, 28 767s, 54 777s and 93 787s; during 2007, Boeing recorded net orders of 1,413 shipsets, consisting of 846 737s, 21 747s, 36 767s, 141 777s and 369 787s.

Hence, net orders during 2008 were down more-than 53.1% from 2007. Even so, during 2008, Boeing booked 287 more orders than deliveries (2008 deliveries consisted of 290 737s, 14 747s, 10 767s, 61 777s and 0 787s, for a total of 375 shipsets); consequently, its commercial ship-set backlog continued to rise during 2008. But, alas, that does not bring good tidings!

Boeing announced Friday that employment at its Commercial Airplanes business unit is expected to decline by approximately 4,500 positions in 2009 as part of an effort to ensure competitiveness and control costs in the face of a weakening global economy. The reduction will bring Commercial Airplanes' employment to approximately 63,500, similar to the level it was at the start of 2008.

Many of the job reductions will be in overhead functions and other areas not directly associated with airplane production. Most of the reductions are expected to occur in Washington State in the second quarter of 2009. Drat!

However, let’s not ignore the following from Boeing’s Current Market Outlook: “Over the past 20 years, air travel grew by an average of 4.8 percent each year. This was despite two major world recessions, terrorist acts, the Asian financial crisis of 1997, the severe acute respiratory syndrome (SARS) outbreak in 2003 and two Gulf wars. During 40 years of producing the Current Market Outlook, we have learned that the resilience of air transport growth comes from its intrinsic importance to the livelihood of people around the world.”

With that in mind, we point out that Boeing recently announced an updated schedule for the 787 program that moves the commercial jet's first flight into the second quarter of 2009 and first delivery into the first quarter of 2010. The new schedule reflects the impact of disruption caused by the recent Machinists' strike along with the requirement to replace certain fasteners in early production airplanes. Possibly, the first 787 delivery may herald the start of the next commercial aircraft cycle upswing!

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