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Boeing Shuts Down Assembly Lines In Response To Pandemic

Boeing Shuts Down Assembly Lines In Response To Pandemic

Boeing Co. (NYSE: BA) said Monday it is shutting down production for two weeks at its aircraft manufacturing plants in northwest Washington to protect the health of employees and their families as the coronavirus pandemic continues to spread in the U.S.

Assembly lines will gradually reduce work levels through Wednesday and then close for 14 days, during which time the company will conduct deep cleaning and establish rigorous criteria for return to work.

2020 was already shaping up as a difficult year for Boeing, which stopped production of the troubled 737 MAX production line in January while waiting for safety regulators to approve its return to service following two deadly crashes in 2018 and 2019. Boeing has designed software fixes for the anti-stall system blamed for contributing to the accidents by pitching the nose sharply downward and is correcting other safety issues found in subsequent audits. Company officials had indicated they expected to get the green light to proceed by early summer.

The aerospace manufacturing industry, including Boeing, is seeking $60 billion from the federal government as part of a $1.6 trillion emergency economic package for businesses and workers. But a deal fell apart Sunday night over differences on what types of conditions should be placed on large corporations for aid.

Boeing's production delay means it will take longer for airlines to receive scheduled deliveries, but with the aviation market cratering because of COVID-19, lack of capacity will be the least of airlines' concerns once the spread is contained and economic activity resumes. Experts forecast travel demand will return slowly and that it could take a couple of years for airlines to get back to last year's traffic level.

Boeing employs nearly 66,000 people in Washington, where it makes the 737, 747-8 and 747-8 freighters, the 767 and 767 freighter, the 777, and the 787. The shutdown will also push back development of the 777X, the next-generation of the wide-body plane that Boeing intended to start delivering next year. Suppliers will also be hurt by Boeing's decision because Boeing will not accept any shipments during the shutdown.

General Electric Company (NYSE: GE) aviation arm, which manufactures engines, said it will cut its U.S. workforce by 10%. GE also said that there will be a temporary lack of work impacting about 50% of its U.S. maintenance, repair and overhaul employees for 90 days.

The aerospace giant's announcement made no mention of its Charleston, South Carolina, plant, where the 787 Dreamliner is also produced.

Boeing said employees in Everett and Renton will receive pay for the initial 10 working days of the suspension — double the company policy, which will provide coverage for the two-week period. Other employees will continue to work from home.

The company said it will restart production in an orderly fashion when the suspension is lifted. Critical distribution of parts to support airline, government and maintenance shop customers will continue. 

"We continue to work closely with public health officials, and we're in contact with our customers, suppliers and other stakeholders who are affected by this temporary suspension. We regret the difficulty this will cause them, as well as our employees, but it's vital to maintain health and safety for all those who support our products and services, and to assist in the national effort to combat the spread of COVID-19," Boeing CEO David Calhoun said in a statement.

Meanwhile, Boeing's European rival Airbus, resumed partial production at plants in France and Spain after a four-day pause to sterilize equipment and develop efficient work protocols while practicing social distancing. The manufacturer said work stations will only reopen if they comply with new hygiene standards and safety measures, which are being implemented at all sites without full interruption.

Boeing sharply lagged Airbus in deliveries and orders last year due to the MAX crisis and is likely to lose even more ground this year.

In February, the Airbus assembly line in Tianjin, China, reopened following a temporary production stoppage related to mass quarantines in that country. Airbus said the plant is operating at normal levels now.

Airbus said it is canceling a planned dividend payment and lining up $16 billion in new credit to help keep its doors open.

Over the weekend, Airbus used an A330-800 test plane to transport about 2 million protective masks from Tianjin back to Europe to help protect people in France and Spain. Additional flights are planned to take place in the coming days, Airbus said.

Major truck and auto manufacturers are also temporarily closing plants because of the health risk associated with the coronavirus.

In related news, Canadian airline Transat A.T. announced it has temporarily laid off 3,600 people, about 70% of its workforce, in Canada due to the lack of business. Last week, the company said it was shutting down flight operations through the end of April.

Air Canada is laying off 3,600 flight attendants and 1,549 flight attendants at low-cost subsidiary Rouge, about 60% of its cabin crews, according to a post from the Canadian Union of Public Employees. The layoffs are effective until April 30, at the earliest. Air Canada is suspending most international and U.S. flights at the end of the month.


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Posted-In: Coronavirus Covid-19 FreightwavesNews Markets

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