Airline Declines Force Boeing Cutbacks

(MoneyWatch) 

The Boeing Co. issued pink slips to 452 of its Puget Sound production workers today, signaling, perhaps, that it is indeed moving toward rumored production cuts as airlines try to delay jet deliveries.

Boeing gave 60-day layoff warnings to 1,100 workers in all today, the first of some 10,000 jobs it expects to eliminate this year, either by layoffs or through attrition.

Previously, the company had indicated it would cut from the ranks of its support staff, sparing the workers it needs to keep whittling away at a record backlog of jet orders. Just last week, Boeing Commercial Airplanes chief Scott Carson downplayed suggestions that big production cuts are in the offing, saying the company may need to lower production by about 10 percent next year, but for this year, it plans to keep building and delivering planes at planned rates.

But the 452 Aerospace Machinist union members who got their 60-day layoff notices today are factory-floor production workers, and that caught union leaders by surprise. "It just doesn't make any sense," said Tom Wroblewski, the union's district president.

So what happened? Further bad news from airlines. The International Air Transport Association said Thursday it expects airlines will insist on delaying deliveries on roughly half of the planes Boeing and Airbus are scheduled to build this year. Falling air traffic means that airlines don't need the new planes that badly, IATA said, and given the state of financial markets, it's questionable whether they'll be able to get money to pay for them.

In addition, Air France has joined Singapore Airlines in announcing it plans to defer deliveries this year -- although it went ahead this week with delivery of the first 777F cargo jet. And, adding a few drops to the bleeding, a Hong Kong billionaire who'd ordered a 787 as a private jet has backed out of that deal.

So far this year, Boeing has lost more orders (32) than it has booked (19).

Amid this environment, Airbus this week announced plans to trim production of its best-selling A320 jets, and Brazilian regional jet builder Embraer said it's cutting jet output by 10 percent, coupled with a 20-percent cut in workers. With Boeing's production worker cuts, it seems likely that it's going to follow suit.