With the ongoing COVID-19 pandemic, one of the sectors to take the largest knock would undoubtedly be the aerospace industry. Global travel has become a luxury of yesteryear and domestic flights have also been limited. The Chicago based company, Boeing, have seemingly taken the brunt of this knock as their third quarter comes to a close.
For the first time in its history, Boeing reported a fourth straight quarter of losses this week. The decision taken by almost every major airline in the world to ground their fleet has proven to be devastating for the U.S. aerospace giants. On Wednesday a remarkable $466 million of loss was reported. The majority of profit accrued by the company comes as result of new aircraft sales, a department which will surely be under enormous stress as airlines seek a bail out from governments as opposed to a new 737.
The company Chief Executive Officer, Dave Calhoun, has made employees aware that a possible 30,000 jobs will be cut in order to minimise their costs. This is likely to be done via buyouts, attrition or layoffs. Estimates have led Boeing to believe that air traffic will end the year at a maximum of 35% relative to the end of 2019. This has forced a major decline in production and focus to be shifted towards jet development.
Following the catastrophic accidents in early 2019 where two 737 MAX’s claimed the lives of 346 people, the chain of events involving the COVID-19 pandemic has seen the company take on a total of $61 billion of debt. The third quarter results were released just ahead of the U.S Federal Aviation Administration was expected to lift the ban imposed on the 737 MAX. “With the 737 MAX inching closer to return to service around year-end, we do not expect Boeing to back away from targets for positive free cash flow in 2021 and delivering more than 50% of the 737 MAXs in inventory.”, says Seth Seifman, an analyst at J.P. Morgan.
While the losses for the past three months were less than anticipated, they have been to the tune of $401 million. During this week the stock price opened at a value of $167.38, at the time of writing, the price is now $150.73. A 9.95% decrease in the space of a week, this caps off a year that has seen the stock price come to less than a half of its former value. Revenue fell to a total of $14.1 billion, which is a 29% decrease to what it was a year ago. Fortunately the loss in revenue was less than anticipated and the decline has come during a period where almost every industry has had to undergo a period of loss.
As the company prepares to release its flagship 737 MAX once more, investors can only hope for a profitable fourth quarter to give the aerospace industry some much needed momentum.
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