GE stock tanks 5% after aviation unit announces it will cut 13,000 jobs this year as coronavirus halts air travel
- General Electric announced it would slash around 13,000 jobs in its aviation division this year to tackle with reduced demand resulting from coronavirus.
- Shares in the company dropped around 5% in morning trade, hitting an intraday low of $6.15 per share.
- Last week GE reported a fall in yearly revenue of 8% to $20.53bn.
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General Electric announced on Monday it would lay off 25% of the workforce in its aviation division as coronavirus batters demand for aircraft parts thanks to air travel virtually grinding to a halt.
GE's stock price tanked 5% in early trading on the news, and by 11.50 a.m. ET was lower by 4.7% to trade at $6.19 per share.
GE Aviation, which manufactures engines for aviation giants like Boeing and Airbus, employs about 52,000 people globally, so will shed some 13,000 staff this year.
David Joyce, GE's aviation vice-chair, president told employees in a memo on Monday: "To protect our business, we have responded with difficult cost-cutting actions over the last two months. Unfortunately, more is required as we scale the business to the realities of our commercial market."
Joyce added: "We are developing our plan for permanent reductions to our global employee base that we anticipate will bring our total reductions this year to as much as 25% (including both voluntary and involuntary actions already announced)."
The announcement to lay 25% of its workforce off comes days after the maker of aircraft engines reported a fall in revenue of 8% year-on-year.
Coronavirus has brought air travel to a halt and proven to be tumultuous time for aviation industry, effectively erasing all demand for new aircraft, and therefore, the parts required to make them.
GE's share price has fallen around 53% since mid-February, when the coronavirus first began to catch investor attention in the western world.
Uncertainty looms on whether passenger demand will pick up following the easing of lockdowns.
Pan-European aviation giant Airbus gave a stark warning about the state of aviation last week and said the sector is "in the midst of the gravest crisis the aerospace industry has ever known."
Airbus posted 13% lower revenues of €10.6 billion ($11.5 billion) as coronavirus continues to erode air travel, lowering the demand for the delivery of new aircraft.
A number of key investors have also ditched their positions in airline stocks.
Billionaire and famed investor Warren Buffet, and chairman of Berkshire Hathaway said he sold all of his stock in the "Big Four" US airlines — American, United, Delta, and Southwest — in April.
Airline stocks plunged on the news of Buffett's sale, with the Big Four trading between 7.5% and 10% lower on Monday.
