On August 16, Boeing announced that it was to begin a second round of "buyouts to employees." The first round eliminated 16,000 jobs. The second round, which will certainly be followed by a fourth and a fifth round, will go beyond the initial estimate of a 10% workforce reduction.
The understanding in the business press is that this is all the doing of the pandemic. Indeed, a Bloomberg reporter, Julie Johnsson, certainly felt she had shifted her wits into high gear when she described the corporation, which is based in Chicago, as the "virus-stricken planemaker." But this description was neither witty or accurate. Boeing's top brass caused much of the corporation's troubles long before the pandemic began to ravage these United States.
But I do not want to look at the past in this post. Let's leave the brazen buybacks and brutal job cuts of the previous decade and instead focus on the planemaker's future in this new and increasingly depressing decade.
The airline industry is a long way from resuming normal business because the pandemic is still out of the government's control. And every day the pandemic is left to fester, the further it is pushed into the future. And the further it is pushed into the future, the larger the number of unknown variables gather around it. And so, the ideal situation is to pull the pandemic back in time as much as possible, because the near-future contains far fewer unknown variables.
A known variable, or what the complex systems theorist Stuart Kauffman calls an adjacent possible (a virtual possibility that is as real as the real outcome of another virtual possibility), is the presidential election. What can be known with some certainty is if Joe Biden is elected then the way out of the pandemic will finally be guided by science. But even if this real possibility becomes real, and there's still a very good chance it may not, the pandemic will probably come under government control around May of 2021. And if this is where we are at that not-too-distant time, we should not expect normal air-travel business to resume until, at the least, six months from that point in time. Why? Because, as New Zealand has shown us, even the intelligent management of COVID-19 does not guarantee total effectiveness. It would not be amazing if the airline industry only recovers in the middle of 2022.
Where is Boeing in all of this? Many of the planes it produced in the past are still on the ground around the world. This lack of physical depreciation (sheer wear and tear) is steadily approaching and diminishing its expected near-future profits. That is just one part of their company's many problems. Another is the fact that the company entered the pandemic with a crisis of its own making: It's new and best-selling plane, the 737 MAX, could not fly very well. Subsequently, all of its kind were grounded in the spring of 2019, at which point Boeing began bleeding billions. This week, the third week of August, 2020, the company was surprised by an order for the 737 MAX. It came from Poland. Pretty much a drop in the bucket. But at least it was something. Nothing like an actual order had happened for the 737 MAX since November 2019.
“We are humbled by Enter Air’s commitment to the Boeing 737 family,” said Ihssane Mounir, Boeing’s senior vice president of commercial sales and marketing in a news release.
To expect anything like major orders for the 737 MAX or other Boeing products until a year after the economy recovers from the pandemic is madness. And, as I said before, the nearest possible time for this recovery to begin is at least six months after the US government has the pandemic under control, or around spring of 2021, if all works out with the presidential election.
But Boeing's execs have found a way to make money while this long period of waiting unfolds. It can sell government-backed corporate bonds with no strings attached. This freedom from the public opens the way for the offering's proceeds to be hoarded for the time being. As Greg Smith, Executive Vice President of Enterprise Operations, explained on July 27, the company's management has "proactively drawn down on [its] $13.8 billion term loan in mid-March and raised $25 billion of new debt, cut discretionary spending and reduced or deferred R&D and capital expenditures." Read that very carefully. It contains the vision of a company that hires thousands of men and women and everything between in our region.
In a time when the plane company could very well use its capital to dream up new ways of flying, new ways of improving its products, and so on, it is committed instead to a program of cash accumulation. No new research, and a dramatic reduction in plane production. That's how Boeing is going to roll. Liquidate as much as possible. Transform thousands of jobs into cash, transform R&D labs and programs into cash, and transform production into cash. This is the only future the higher-ups can imagine. The terrific expansion of Boeing's cash reservers.