Raytheon Technologies [RTX] CEO Greg Hayes last Friday said that the company will transfer some of its commercial workers to defense projects to help the newly merged aerospace and defense giant maintain its workforce with the coming downturn in the commercial aerospace market.
“We’ve got a great workforce and frankly with the backlog on the defense side we’re working hard today to make sure that we transition work from the commercial aerospace side to the defense side of the business,” Hayes said on CNBC’s morning news segment, Squawk Box. “We’re going to transfer engineers. We’re going to transfer production workers. We’ll see.”
Hayes’ comments came fresh on the heels of the Raytheon and United Technologies merger, which closed last Friday, creating a $74 billion aerospace and defense supplier of aircraft engines, avionics, missiles, space systems, defense systems, and technical services to domestic and international customers.
The merger closed amid a growing global health and economic crisis brought on by the COVID-19 pandemic, which has caused precipitous declines in domestic and global air travel. To get in front of an expected drop in demand for commercial aerospace products, Hayes said the company is already “taking out cost, reducing some spending in engineering, taking capex down, all discretionary spending.”
The fallout from the pandemic “might be a two-year problem,” Hayes warned. His comments echoed a statement last Thursday by Boeing [BA] President and CEO Dave Calhoun that “It will take time for the aerospace industry to recover from this crisis.”
The workforce is Hayes’ top priority, he said, reminding viewers that the country has made it through previous crises in the past two decades.
“My first and foremost concern though is to keep the workforce intact because we will get through this,” Hayes said. “We lived through 9/11, we lived through the financial crisis,” he said, referring to events in 2008 that shook Wall Street. Later in the show, Hayes said that the commercial aerospace market will rebound, just as it has after other crises.
Hayes said that the company will have a clearer idea of its commercial demand signals once aircraft manufacturers Airbus and Boeing [BA] get a grip on demand for their products. When that happens, Raytheon Technologies will “obviously have to make some adjustments but we’re going to try and do it as judiciously as possible,” he said.
A market return likely awaits a vaccine for COVID-19, which is when “people feel safe to fly again,” Hayes added.
“But people want to travel, people want to connect, human beings are social animals so it’s going to come back, we want to be prepared for it.”
Raytheon Technologies said it will release first quarter financial results on May 7.