Boeing CEO Dave Calhoun told shareholders Monday the staggering business downturn due to the coronavirus pandemic is likely to impact the company through 2023 and beyond.
"We expect it will take two to three years for travel to return to 2019 levels and an additional few years beyond that for the industry's long-term trend growth to return," he said.
Speaking at the company's annual meeting of shareholders, which was held virtually because of the pandemic, he added that when the commercial airline market stabilizes, it "will be smaller and our customers' needs will be different."
He described the devastated state of the current airline world, with 2,800 planes grounded in the U.S. alone and passenger traffic down 95%.
Describing a crisis "unlike anything we have ever experienced," he said airlines are "grounding fleets, deferring airplane orders, postponing acceptance of completed orders, and slowing down or stopping payments."
In response, he said Boeing needs to change production rates "to balance supply and demand." However, he added that details on the rate cuts, which are likely to spur thousands of local job losses, must wait until earnings results are announced on Wednesday.
However, he offered an indirect glimpse at the sweep of the cuts ahead when he referred to the prospects for Boeing's thousands of suppliers, most of whom before the pandemic had been gearing up for accelerated production rates after the expected clearance for the 737 MAX to return to service.
"The plans they have made and the investments they have made around the future, not dissimilar to ourselves, they now have to tear up and start over and resize themselves to accommodate that new future," Calhoun said.
Calhoun referred only briefly to the termination Saturday of Boeing's proposed acquisition of the commercial jet business of Brazilian manufacturer Embraer, previously promoted as a strategic priority of the company.
He stuck strictly to the statement issued when the collapse of the deal was announced: the two sides could not resolve "critical unsatisfied conditions" in the negotiations. Embraer intends to sue Boeing over the decision, and Boeing maintains that it doesn't have to pay a $100 million termination fee.
Calhoun offered no news on the timing of the return of the 737 MAX to service.
The restrictions during the pandemic have slowed the work of winning Federal Aviation Administration approval for the 737 MAX to fly again. A person familiar with the details said Boeing's target schedule has slipped from mid-summer to late summer.
"No new issues have been identified," that person said, then added that documenting and testing the software changes to the MAX's flight controls "is taking longer than expected and this need for virtual work is beginning to have some impacts."
However, Calhoun did not disclose any new delay Monday. He said only that "progress has continued during the pandemic."
No shareholder dividends anytime soon
Ahead of Boeing's earnings results Wednesday, Calhoun did not disclose any financially material details.
In answer to a question that raised a major worry for Boeing retirees, he asserted unequivocally that the company pension plan is secure.
The dramatic fall in Boeing's stock price has caused concern about that because management chose to fund the pension plan in part with company shares.
But Calhoun offered reassurance: "There's nothing I see that would put risk into the pension plan," he said.
Responding to a shareholder question about when the company would resume paying dividends, Calhoun said bluntly "it will be years."
He said the company will have to borrow heavily in the next six months "to get through this very difficult moment" and that repaying that debt would be the priority, not giving cash to shareholders.
Despite the grim outlook for the next couple of years and beyond, Calhoun expressed optimism about the company's eventual recovery.
Citing the industry's underlying demand fundamentals -- the need to connect the world's economies and a growing middle class around the globe with the resources and desire to travel -- he said he continues "to believe strongly in the future of aviation and of Boeing as the aerospace leader."
"There is no doubt people will start flying again," he said. "And as the industry recovers, slowly at first and then with greater vigor, we'll be ready."