Boeing Scraps Most 2021 Pay Raises, Gives Out Stock Instead
(Bloomberg) -- Boeing Co. is scrapping most pay raises next year and giving out shares instead as the company braces for a long recovery from the coronavirus pandemic.
The restricted stock units will vest for workers who stick with Boeing through Dec. 14, 2023, Chief Executive Officer Dave Calhoun said in a message to employees Wednesday. Executives are excluded from the one-time grant, as are union members, whose annual compensation is set through collective bargaining.
Even with a vaccine, it may take another three years for Boeing to rebound fully, Calhoun warned. Boeing’s debt has soared to $61 billion and the company is shedding about 30,000 employees -- roughly 20% of the workforce -- as a collapse in demand for new jetliners compounds the financial squeeze from a 20-month grounding of the 737 Max, the planemaker’s best-selling model.
“We will continue to position our company for the long term and chart a course to the other side of the recovery by making smart bets and investments,” Calhoun told employees. “That starts with investing in our people, empowering them to make the changes that will transform our company, and sharing in our successes, together.”
While executives, managers and most employees will go without raises next year, the stock awards have the “potential to deliver value significantly beyond a traditional merit increase,” Calhoun said. It’s the first time Boeing has widely distributed restricted stock units, which are typically reserved for senior leaders.
Since the end of October, Boeing soared 59% through Tuesday, the most on the Dow Jones Industrial Average, as U.S officials cleared the 737 Max to restart commercial flights and the distribution of coronavirus vaccines began. Boeing had been the Dow’s worst performer during the first 10 months of 2020 and is still down about 30% for the year as a whole.
The shares fell less than 1% to $228.72 at 12:06 p.m. in New York.
With Boeing expected to continue burning cash for at least another year, executives have been taking steps to preserve liquidity. The company is funding its pensions and 401(K) plans with stock instead of cash. It’s also weighing an equity sale to help reduce its debt burden, Chief Financial Officer Greg Smith said earlier this month.
Raising between $5 billion and $15 billion at current prices would boost the company’s share count anywhere from 4% to 12%, Cai von Rumohr, an analyst at Cowen & Co., said in a report Tuesday.
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