Boeing CEO Warns Aviation Rebound Will Take Years

Monday, April 27, 2020
By Paul Martin

by Tyler Durden
Mon, 04/27/2020

Days after President Trump floated the idea that the US government could purchase five years of airline tickets in bulk as part of a stimulus package for crippled airline carriers, Boeing CEO’s Dave Calhoun has warned that air travel growth might not return to pre-corona levels for years.

Calhoun made the comments on Monday morning at an annual shareholder meeting. He said it would take 2-3 years for air travel growth to return to pre-corona levels, adding that long term growth trends could take even longer to recover.

“Based on what we know now, we expect it will take two to three years for travel to return to 2019 levels and an additional few years beyond that for the industry’s long-term trend growth to return,” he said.

Calhoun said the new reality in a post-corona world is a depressing one for airlines: “…they are making difficult decisions that result in grounding fleets, deferring airplane orders, postponing acceptance of completed orders, and slowing down or stopping payments.”

This is more bad news for Boeing, who has drawn down on revolvers as it struggles to survive, requesting a government bailout as it’s faced with a wave of cancellation orders for its planes.

Calhoun said Boeing would need to borrow more money in the next six months. He said it could be years until the company begins paying a dividend again, nevertheless, restarting its stock buyback program.

His gloomy outlook echoed our report from April 20, which confirmed the airline industry has crashed as the virus pandemic drove travel demand down to the lowest in decades.

We noted that United Airlines and other carriers have warned it could take several years for recovery as well. As a result of depressed passenger traffic, airlines are expected to slash tens of thousands of workers, cancel new plane orders, and trim costs across the board later this year.

“Without a quick improvement in demand, we could see the airlines look to shed 800 to 1,000 aircraft, which could result in a reduction of 95,000 to 105,000 airline jobs,” Cowen analyst Helane Becker wrote in an April 13 client note.

United’s chief executive and president, Oscar Munoz and Scott Kirby said in an April 15 memo to employees that the industry has a “challenging economic outlook” and the overall workforce at the company will be smaller in the future than today.

Airlines cheered when Congress last month allocated $50 billion in bailouts to the sector that included $25 billion in grants and loans to keep 750,000 workers employed through September 30.

Cowen & Co. has predicted ticket sales won’t recover to pre-corona levels until 2025, which explains why President Trump wants to purchase bulk tickets for the next five years.

As for Boeing, well, they might be screwed for quite some time as a recovery in the airline industry is years away. This would be a perfect time for Boeing to restructure the company and change its name, along with the name of the 737 Max.

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