Ever since Warren Buffet sold his entire stake in airline stocks, investors have been even more on edge in regards to this industry than before. Usually, downtimes such as these mark great opportunities for value investors like the oracle of Omaha to buy shares while they are cheap. However, it seems like many airlines might be on the verge of bankruptcy. While rumors surrounding which major airline may or may not go under in the coming weeks continue to swirl, major job cuts are already confirmed to be on the horizon. Boeing (NYSE: BA) is expected to begin major layoffs in the upcoming days, with at least 2,500 layoffs in just one plant having been effectively confirmed as part of the first phase of cutting costs.
According to the Wall Street Journal, union officials warned that layoffs at Boeing’s Seattle plant are upcoming in the next couple of days. This represents the first major reduction in staff in over three years, with the company shedding 1,500 workers back in 2017 in an effort to cut costs. While this is just one regional facility, similar job cuts are expected to take place globally.
Back in April, Boeing warned investors that it would be firing as much as 10% of its global workforce in order to try and cut costs. This was in addition to other measures, such as suspending its shareholder dividend while also suspending executive pay for its CEO and other top directors.
Among other things, Boeing has stated that it would be cutting its output of 878 twin-aisle airplanes by 50% while resuming production of just a handful of 737 MAX jetliners sometime this quarter. The company still hasn’t received regulatory clearance that would allow 737 MAX’s to be airborne again following two high-profile crashes involving the jetliner.
A number of other aerospace-related stocks, whether that be airplane makers like Airbus or actual airlines, have all reported significant layoffs. One of Canada’s largest airlines, Air Canada, announced it would be laying off 20,000 workers in June. Another North American airline, WestJet, is looking to do the same in the near future.
One small airline, a Latin American Airline Latam, has already filed for chapter 11 bankruptcy protection recently. While a relatively minor airline, many investors are wondering whether this is the canary in the coal mine for the industry as a whole and whether more bankruptcies are inevitable.
Boeing Company Profile
Boeing is the world’s largest aerospace and defense firm. With headquarters in Chicago, the firm operates in four segments, commercial airplanes, defense, space & security, global services, and Boeing capital. Boeing’s commercial airplanes segment produces about 60% of sales and two-thirds of operating profit, and it competes with Airbus in the production of aircraft ranging from 130 seats upwards. Boeing’s defense, space & security segment competes with Lockheed, Northrop, and several other firms to create military aircraft and weaponry. The defense segment produces about 25% of sales and 13% of operating profit, respectively. Boeing’s global services segment provides aftermarket servicing to commercial and military aircraft and produces about 15% of sales and 21% of operating profit. – Warrior Trading News
