Paul Royall explains Boeing's job losses

The group has also stunned investors and Wall Street traders by predicting the Asian financial crisis, which has been the main cause of Boeing's problems, could last up to five years.

The dire news sent Boeing's shares into a tailspin. Other aerospace stocks also fell heavily, causing the New York stock market to tumble on Wednesday.

Huge reductions

Boeing's decision means a reduction of up to 20% of the American company's workforce - one of the largest industrial restructurings in history.

The company is to cut 20,000 jobs on top of the 28,000 jobs announced earlier this year.

Boeing plans to scale back production of several commercial jet lines and blames the cutbacks on the continuing Asian crisis and a slump in the airline market.

BBC Business Correspondent Richard Quest: "It's been feast and famine for Boeing"

"Clearly, the economic slowdown in Asia is driving air traffic down which impacts our customers' plans and operations," said Alan Mulally, Boeing Commercial Airplane Group president.

"Our actions today will match production to market demand to support our customers."

Boeing's president and chief operating officer Harry Stonecipher said: "It's not a pretty picture."

Profits nosedive

Boeing has also lowered its net earning forecast for 1999 from $2bn to between $1.5bn and $1.8bn. It said 1998 profits were expected to be slightly above $1bn, as earlier forecast.

Output in decline

Boeing has not said where the layoffs will take place.

Boeing said it would deliver 546 commercial aircraft this year and 620 in 1999 in line with targets. But this will nosedive to 490 in 2000.

Boeing will reduce current manufacturing output of 51 planes a month to 47 at the end of next year and 38.5 planes a month by the end of 2000.

The production of 747 jetliners - currently five a month - will be cut to 3.5 from the middle of next year, and then to 2 late next year. If market conditions do not improve, it will be reduced to just one a month.

The only glimmer of hope is the increase in number of its new generation 737s as planned until late 2000 when it will decrease production from 24 planes a month to 21.

Domino effect

BBC Business Correspondent Richard Quest said the job cuts will have repercussions for subcontractors around the world.

"Every bit of avionics, from the electronics in the cockpit, to the flaps, right down to the tail of the aircraft at some point is dealt with by another company. They will see fewer orders," he told BBC News 24.

He said that after a boom in which Boeing could not get the planes off the production line fast enough, the firm now finds it has surplus stock in store. "Boeing's had enormous production problems. It's been feast and famine," he said.

Boeing employees were stunned by the layoffs. Daniel Smith, a fuel line plumber on 777 jetliners at Boeing's Everett assembly plant said: "It came as a suprise although I knew more layoffs were coming. But I expected less layoffs."

Boeing is expected to disclose more details of the cutbacks on Wednesday.

Dealers expressed their disappointment with the announcement. "There's nothing in here to like," said analyst Joe Campbell of Lehman Brothers.