About 30,000 Boeing employees on Wednesday must start taking vacation or sick time, or apply for unemployment, after the plane-maker decided Sunday to keep its Puget Sound plants in Washington closed indefinitely.
The workers had been paid during the initial two-week work stoppage that began March 25, when Boeing closed its Puget Sound factories to grapple with the spread of covid-19, the disease caused by the novel coronavirus. They were scheduled to go back to work Wednesday.
The region's largest private employer told employees Sunday in an email that it "is extending the temporary suspension of operations at all Puget Sound area and Moses Lake sites until further notice."
On Monday, the company said it is also suspending work at its 787 Dreamliner plant in South Carolina, temporarily shutting down its last commercial-jet factory still operating amid the covid-19 outbreak.
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Manufacturing at the factory will stop late Wednesday, the plane-maker said in a statement. The pandemic injects additional uncertainty into Boeing's production plans for the 787, which along with the 737 Max has been a critical source of cash. Demand for long-haul travel has cratered as airlines park fleets, and analysts widely expect Boeing to slash Dreamliner output when work eventually resumes. The Max, Boeing's best-selling jet, has been grounded more than a year after two deadly crashes.
"It is our commitment to focus on the health and safety of our teammates while assessing the spread of the virus across the state, its impact on the reliability of our global supply chain and that ripple effect on the 787 program," said Brad Zaback, vice president and general manager of Boeing's South Carolina site.
In Washington state, Boeing has roughly 70,000 employees. Sunday's decision affects about 30,000 of them, mostly production workers. Other employees who can work from home will continue to do so, and volunteer employees will continue to maintain essential services at the plants.
Boeing's decision comes as the state continues to report increasing numbers of coronavirus cases, though at a slower rate than some other areas of the country. On Sunday, state Department of Health officials confirmed an additional 393 cases and 28 deaths from covid-19, bringing the state total to 7,984 cases and 338 fatalities. The bulk of the cases remain in King County, where 3,158 people have fallen ill and 208 have died.
Boeing said its decision was based on its "continuing focus on the health and safety of its employees, current assessment of the spread of covid-19 in the state, the reliability of the supply chain, and additional recommendations from government health authorities."
The company is paying employees their regular salaries only through today, said Boeing spokesman Bernard Choi. From then on, employees not working can use paid time off -- either vacation or sick leave.
According to state Employment Security guidelines, employees should also be eligible for unemployment benefits. A fact sheet on the agency's website states that when a company shuts down "due to a business slowdown" or "due to a quarantine," its employees are eligible for unemployment insurance.
However, the state's unemployment application process has been bogged down by an unprecedented number of claims, and officials have said delays for new applicants are likely.
Choi said Boeing will continue to provide medical benefits for all employees during the work stoppage.
While stopping wages for more than 30,000 employees will stanch some of Boeing's cash outflow, with virtually no commercial airplane revenue coming in during the indefinite shutdown, the company's financial crisis will continue.
The spread of the virus has ended all Puget Sound production, reduced global air travel to a trickle, and pushed Boeing's airline customers to seek government aid to avoid going out of business.
Boeing has $15 billion in cash on hand, but it will need more given the scale of the airline downturn.
The shock to the airlines is evident in a memo Friday to Alaska Airlines pilots sent by Capt. John Ladner, vice president of flight operations. Ladner wrote that the previous day the airline carried 4,600 passengers on 297 flights.
That's an average of just 15 people on each flight. On the same day last year, Alaska carried 99,500 passengers on 780 flights.
The airline collapse means Boeing faces an indefinite period of very low demand for aircraft. Even when production restarts, many airlines won't want to take the jets they had previously ordered.
On Friday, big airplane lessor Avolon canceled orders for 75 Maxes, worth about $3.8 billion. Because of the delay in delivering the Max, many customers will be able to cancel orders for that plane with no penalties.
Airplane lessors supply jets to airlines all over the globe, making them leading indicators of where the market is going. That suggests more Max cancellations are likely ahead.
In March, Boeing asked the government to provide $60 billion in bailout funds to the industry, including its supply chain, to enable it to survive the coronavirus crisis.
Yet Boeing Chief Executive Officer Dave Calhoun has said he doesn't want a bailout with too many strings attached. He said he won't accept the government taking an ownership stake in Boeing.
Last week, Boeing Commercial Airplanes CEO Stan Deal announced voluntary buyouts to reduce the size of the workforce, and warned employees to expect "a different-sized commercial market," implying a significantly smaller one, after the virus emergency is over and recovery begins.
Deal told employees Sunday that the decision to continue the suspension of production put the priority on "the health and safety of our employees, their families and our communities."
Information for this article was contributed by Dominic Gates of The Seattle Times and by Julie Johnsson of Bloomberg News.
Business on 04/07/2020