Boeing CEO David Calhoun Warns of Potential US Airline Failure as Traffic Levels Plummet

Boeing's Calhoun said it was "most likely" that a U.S. carrier could fail this autumn as passenger traffic levels will only very slowly return to normal following the coronavirus pandemic.
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Boeing Co.  (BA) - Get Report CEO David Calhoun warned Tuesday that a major U.S. airline may fail later this year as a collapse in passenger traffic continues to test the resilience of the aerospace sector amid the global coronavirus pandemic. 

Speaking with NBC News in an interview that is expected to air later today, Calhoun said it was "most likely" that a U.S. carrier would fail later this autumn, given the 'adjustments' needed for the industry to cope with the crippling pandemic.

"Traffic levels will not be back to 100%. They won't even be back to 25%," Calhoun told NBC. "Maybe by the end of the year we approach 50%. So there will definitely be adjustments that have to be made on the part of the airlines." 

Boeing shares were marked 1% higher in early Tuesday trading to change hands at $130.30 each, while major carries United Airlines  (UAL) - Get Report, Delta Air Lines  (DAL) - Get Report and American Airlines  (AAL) - Get Report were all trading modestly lower heading at the opening bell. 

Last week, Reuters reported that United plans to cut at least 3,400 management and administration positions in October, some 30% of that sector's headcount, while warning that a similar percentage of the carriers 12,250 pilots could be laid off as well as near-term travel demand remains 'essentially zero'.

U.S. airlines are legally obligated to retain all of their staff until October 1 under terms of last month's CARES Act that provided the industry with $25 billion in coronavirus relief, although some 37,000 workers at Delta have volunteered to take unpaid leave, while United has reduced working hours for around a quarter of its 15,000 workforce. 

Boeing itself will likely need to cut at least 10% of the company's workforce -- with deeper losses in commercial airplanes and services businesses -- with Calhoun citing the expected fall in global commercial airlines revenues of around $315 billion this year in a letter to employees following its first quarter earnings release.

"The aviation industry will take years to return to the levels of traffic we saw just a few months ago,' Calhoun said. "We have to prepare for that. In today's first-quarter earnings disclosure, we will be announcing a number of steps we're taking to meet that new reality."

The International Air Transport Association lobby group, known as IATA, said last month that global airline passenger volumes for the month of March fell to the lowest levels since 2006, with revenues down 52.9% from the same period last year.

Cargo traffic was down 15% from the prior year, IATA noted, and is likely to fall between 14% and 31% for the whole of 2020,

IATA also warned that, even as countries around the world lift travel restrictions as coronavirus case numbers subside, demand is likely to remain subdued for several months and the industry faces a $314 billion hit to revenues that could cost some 25 million industry-related jobs.