This week marks a disappointing milestone across commercial aerospace supply customer demand and supply networks.

U.S. based manufacturer Boeing will handout upwards of 6800 involuntary employee layoff notices to U.S. based employees. The manufacturer is further reducing headcount among teams located outside the U.S., with upwards of over 600 departures reported thus far. The move is incremental to the upwards of 5500 employees that applied for and accepted voluntary layoff notices in exchange for specific severance packages. Grounded Boeing 737 MAX's

All of these moves are part of the company’s actions to cut an expected 10 percent of the manufacturer’s workforce. In all, the shedding of nearly 13,000 workers is the tip of the iceberg to ongoing separations that have and will continue to occur across associated aircraft program supply networks. In the coming months, there are likely to be other setbacks.

Aircraft engine manufacturer General Electric has shed upwards of 10,000 workers while Rolls Royce has announced plans to cut 8000 positions. Fuselage and airframe component supplier Spirit AeroSystems reportedly has announced upwards of 1500 worker separations with other announcements to follow in the coming weeks, and the cascading announcements among other industry suppliers will continue.

Rival Airbus is not immune to needs to shed headcount but not as likely to be the scope of Boeing, by none the less in the thousands.

CEO David Calhoun indicated in a statement that the COVID-19 impact on the global airline industry implies deep cuts in the number of commercial jets and services that customers will require over the next few years.

From our Supply Chain Matters lens, while the above statement is pertinent to the global commercial airline industry, Boeing’s management has some culpability in its flawed design and mismanagement decisions related to the 737 MAX aircraft program, where former operational and production completed aircraft remain grounded nearly 15 months after two tragic accidents involving this aircraft. That disruption crisis is yet to be resolved.

 

Other Implications

Industry insiders and investor interests remain concerned that with financially distressed OEM’s, and with governments already straining to buffer severe economic shocks, industry suppliers will be desperate potentially open the door for opportunistic foreign investors to hone-in and acquire access to advanced aerospace technology and manufacturing process capability.

During the prior 2008/2009 global financial crisis, Chinese interests selectively acquired supplier capabilities among automotive, alternative energy and other termed strategic industry interests. The potential for similar moves looms for this industry.

As this blog has noted in many prior industry specific commentaries, the commercial aircraft industry, and its associated aircraft demand and supply networks, which over the prior years have been the envy of other industries and investors with multi-year technology innovation and multiyear backlogs of customer orders, has been totally disrupted by a pandemic.

What may be termed as a singular “black swan” event, for an industry that plans in 20 year plus demand cycles, is now reeling. Other impacts are yet to occur, and highly experienced worker skills will be lost temporarily, or permanently.

Thus is the fodder of future business case study.

Once again, that Eagles tune lyric: “In a New York minute, everything can change.”

 

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