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Boeing Freezes Hiring

Company leaders painted a sobering picture for the business in 2020.

A Boeing 777X airplane takes off on its first flight at Paine Field in Everett, Wash., Jan. 25, 2020.
A Boeing 777X airplane takes off on its first flight at Paine Field in Everett, Wash., Jan. 25, 2020.

Boeing's stock tumbled 18% on Wednesday, its biggest one-day percentage drop since 1974, and company leaders painted a sobering picture for the business in 2020.

The Chicago-based company said it has imposed a hiring freeze in response to the virus outbreak that is undercutting air travel and threatening to kill airlines' appetite for new planes.

Boeing said it received 18 orders last month for new large planes, but 46 orders were canceled, most of them for the grounded 737 Max, leaving the company with a net loss of 28 orders in February.

The company is also restricting employees' travel and discretionary spending and limiting overtime to work on getting the Max back in flight.

Shares of Boeing Co. fell below $200 for the first time since mid-2017, closing at $189.08. They have plunged 58% in just over a year.

The latest drop occurred after Bloomberg News reported that Boeing will soon draw down the last of a $13.8 billion bank loan it arranged a little over a month ago. The company has been burning through cash since halting deliveries of the 737 Max last spring, and it is unclear when regulators will let the grounded plane fly again.

“The year ahead is shaping up to be as challenging for our business as any in the recent past,” CEO David Calhoun and Chief Financial Officer Greg Smith said in a note to employees. “On top of the work of safely returning the 737 MAX to service and the financial impact of the pause in MAX production, we're now facing a global economic disruption generated by the COVID-19 coronavirus.”

The warning about 2020 is a strong statement considering that Boeing is facing its biggest crisis in decades after two deadly crashes involving Max jets and just posted its first full-year loss since 1997.

Indeed, 2020 is off to an ominous start for Boeing. It reported no orders for new commercial planes in January while rival Airbus racked up 274 orders. Boeing’s 18 orders in February were all for so-called widebody or twin-aisles jets — larger planes that are typically used for long flights.

Through Feb. 29 Boeing has reported a loss of 43 orders for the Max, as customers switched those orders to other models. For example, Air Lease Corp., which leases planes to airlines, swapped 9 Max orders for three larger 787 jets, and Oman Air converted 10 Maxes into four 787s.

The company delivered 30 planes in the first two months of the year compared with 95 a year earlier, before it halted shipments of Max jets. Boeing depends on deliveries to generate cash flow.

Airlines, however, are retrenching to survive a sharp downturn in travel — they are unsure how long it will last.

The three largest U.S. airlines — Delta, American and United — and several international carriers have announced deep cuts to their schedules. The International Air Transport Association, an airline trade group, estimates that the virus could cost airlines up to $113 billion in lost revenue, with the biggest losses in Asia, whose fast-growing airlines were on a buying spree for new jets.

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