Boeing Co. (BA) - Get Report shares surged to a six-week high Thursday after the planemaker said it has resumed production of its troubled 737 MAX aircraft, just hours after revealing plans to cut more than 12,000 jobs.
Boeing said the program is running at a 'low rate' in its Renton, Washington factory, but did not indicate when it had resumed following its suspension earlier this year. Boeing is still waiting approval from the Federal Aviation Administration, as well as regulators around the world, in order to allow the 737 MAX to return to service following fatal crashes in late 2018 and early 2019.
Boeing also said Wednesday that 6,770 of its U.S. workforce had been selected for involuntary layoffs, a figure that adds to the 5,520 workers who had agreed to voluntary redundancy packages. The job cuts reflect Boeing's aim of reducing its 160,000-strong workforce by around 10% by the end of this year.
"The COVID-19 pandemic’s devastating impact on the airline industry means a deep cut in the number of commercial jets and services our customers will need over the next few years, which in turn means fewer jobs on our lines and in our offices," CEO David Calhoun said in a statement. "We have done our very best to project the needs of our commercial airline customers over the next several years as they begin their path to recovery."
Boeing shares hit a session high of $156.70 in early trading, the highest since April 9, before paring that gain to around 3.75% to change hands at $155.13 each.
Boeing's net orders for the year, as of the end of April, were pegged at -255, including 281 cancellations of the grounded 737 MAX, and demand is unlikely to return to last year's levels until commercial airline capacity improves.
Even if that happens this year, the sector is likely to be burdened by around $120 billion in new debt, the International Air Transport Association estimated Wednesday, putting further pressure on its ability to expand with new aircraft.
Boeing may also find itself pinched by U.S.-China trade tensions, following Thursday's vote in Beijing to pass a sweeping Hong Kong Security bill, as the world's two biggest economies threaten retaliatory tariffs and trade restrictions in the wake of the COIVD-19 crisis.
Earlier this month, China's state-backed English language newspaper said Beijing could cancel its entire backlog of Boeing plane orders in a move to counter a decision by the U.S. Commerce Department to restrict access to China-backed Huawei technologies to domestic tech markets.
Former Boeing CEO Dennis Muilenberg said last year that "the lack of orders from China in the past couple of years has put pressure on the production rates" and noted that "the U.S.-China trade situation has presented challenges for our wide-body production plans."
Last month, China Development Bank Financial Leasing cancelled an order for 29 Boeing 737 Max jets, the grounded jet involved in two fatal crashes in late 2018 and March of 2019, reducing its total backlog to 70.