[Asia Economy reporters Naju-seok and Kwon Jae-hee] The US Federal Reserve (Fed) analyzed that the leisure and accommodation industries suffered the most severe damage as travel and tourism declined due to the COVID-19 pandemic. Boeing, the world's largest aircraft manufacturer, announced massive layoffs.
On the 27th (local time), the Fed pointed out in its economic trend report, the "Beige Book," that "with travel and tourism activities almost disappearing, the leisure and accommodation-related industries suffered severe damage." It added, "Manufacturing activity contracted in most regions across the US," highlighting that "the decline in industrial activity was particularly notable in the automobile, aviation, and engine-related sectors."
The economic downturn caused by COVID-19 immediately impacted employment negatively. The Beige Book predicted that the unemployment rate in the US would also rise due to the COVID-19 impact. Last month, the US unemployment rate recorded 14.7%, and the May figures, scheduled to be released next week, are expected to worsen. Since the lockdown measures were imposed in March to curb the spread of COVID-19, 39 million people in the US have applied for unemployment benefits.
Boeing announced large-scale restructuring on the same day. Facing a loss of trust due to consecutive aircraft crashes and compounded by COVID-19, the company proceeded with workforce reductions.
According to CNBC and others, Boeing will cut about 12,000 employees. Of these, 6,770 will be temporarily laid off, and the remaining 5,520 will be offered voluntary retirement with severance pay.
David Calhoun, Boeing's Chief Executive Officer (CEO), stated, "We are facing the unfortunate moment of having to conduct forced layoffs even for employees who do not wish to leave," adding, "Layoff notices are being issued only to employees working in the United States."
This layoff was foreshadowed when Boeing announced its first-quarter earnings last month. Boeing recorded a net loss of $641 million (approximately 781.3 billion KRW) in the first quarter of this year, plunging sharply from a profit of $2.15 billion in the same period last year. Following the worst performance, new orders in April hit zero. Major customers canceled 108 orders for the 737 Max model, which was involved in crash disasters. Additionally, the '787 Dreamliner,' one of Boeing's flagship models, was produced at a rate of 10 to 14 units per month but will be cut in half. Production of the '777' model will also be reduced.
At the time of the first-quarter earnings announcement, CEO Calhoun said, "Due to the impact of COVID-19, global air travel demand has plummeted," and announced, "We will reduce about 10% of the total workforce."
Considering that Boeing employs a total of 160,000 people, further restructuring is highly likely.
Boeing has also launched a comprehensive spending reduction plan to secure cash. This includes suspending dividend payments and abandoning the joint venture establishment with Brazilian aircraft manufacturer Embraer.
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