Al Root

Boeing is laying off employees while it tries to turn around its struggling business. The problems are mostly specific to the company, but its moves still have ripple effects across the aerospace and defense industry.

Friday, Boeing said it was laying off 10% of its global workforce, some 17,000 people, to "align with our financial reality and to a more focused set of priorities." Workers probably hope it isn't the start of a trend.

The reason for the cuts is that Boeing hasn't reported a full-year profit since 2018 and has amassed more than $40 billion in new long-term debt as a result of the Covid-19 pandemic and the worldwide grounding of the 737 MAX jet for much of 2019 and 2020. What is more, quality problems have slowed down production, hurting revenue, for most of 2024.

Most of the rest of the commercial aerospace industry is booming. Through midday trading Wednesday, shares of engine supplier GE Aerospace were up about 120% over the past 12 months. Shares of RTX are up about 70%.

Boom times should mean more jobs, but Airbus announced Wednesday that it would lay off 2,500 employees in its defense and space business to "enhance" the division's competitiveness.

"In recent years, the defense and space sector and, thus....have been impacted by a fast-changing and very challenging business context with disrupted supply chains, rapid changes in warfare, and increasing cost pressure due to budgetary constraints," said Mike Schoellhorn, Airbus's defence and space CEO, in a news release.

One reason layoffs can become a trend is that nothing happens in a vacuum: If Boeing is successful in becoming more competitive, it would affect Airbus's business and so on. And layoffs at one firm often encourage management at other companies to review staffing levels.

Don't forget that in early 2023, a lot of big tech firms announced large layoffs. Alphabet, Amazon.com, and Microsoft laid off some 40,000 worker, highlighting how job cuts can spread through an industry.

As for the aerospace industry, Jefferies analyst Sheila Kahyaoglu looked at staffing for suppliers she follows. Levels at Hexcel, Woodward, and Honeywell are relatively high, she said.

Those three companies didn't immediately respond to requests for comment.

No one wants to hear about layoffs. Overall, roughly 500,000 Americans work in aerospace product and parts manufacturing, according to the Bureau of Labor Statistics. That number could rise as the industry produces more planes.

Boeing stock was up 0.7% at $153.51 in midday trading. Shares were up about 2% since the layoff announcement, but the stock is still down more than 40% in 2024. Airbus's American depositary receipts were up 0.4% at $36.98. The S&P 500 and Dow Jones Industrial Average were up 0.3% and 0.6%, respectively.

Write to Al Root at allen.root@dowjones.com

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October 16, 2024 14:39 ET (18:39 GMT)

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