Airbus is facing a wave of production cuts and job losses set to follow with its CEO warning that the aerospace industry is facing its “gravest crisis”.
The grim forecast followed an internal memo to staff on Friday by CEO Guillaume Faury warning that further cuts were likely with the company “bleeding cash” as a result of cancelled and delayed orders by airlines as they struggle to survive a catastrophic drop in demand caused by the pandemic. Production has already been cut by a third with 6,000 workers placed on government furlough schemes. Airbus said there were likely to be further cuts and thousands more job losses in June.
The European aircraft maker plunged into net loss in the first quarter and warned that the industry would have to learn to “coexist” with the coronavirus. Faury added Airbus was aiming to define “a new world by June” when he believed that longer-term demand from airlines would be clearer.
Airbus “resizing” business for short- and medium-term
With analysts suggested that a return to normal business could take between three and five years, Airbus will be taking steps to “resize” the business for both the short and medium term.
The company employs 81,000 people in its passenger jet business and has a total workforce of 130,000. The collapse in demand due to coronavirus has resulted in a reverse of a decade of growth for aircraft manufacturers.
The group had a €8bn cash outflow in the first three months, while lower aircraft deliveries contributed to consolidated net losses of €481m, against a €40m profit a year ago.
Industry faces “gravest crisis in its history”
“Our industry now faces probably the gravest crisis in its history,” said Faury. He added: “We are very aggressively adapting to the short term [situation] and assessing what is the most likely new scenario for aviation for the next years.”
In France, where 3,000 workers were on furlough, Faury added that the number was likely to double. The Airbus boss said any further adjustment in production was likely to be smaller than the cut that had already been announced.
“This is a time of huge change,” he said. “It is not easy to give an outlook for the future.”
Faury insisted passenger traffic would return to normal in the longer term and the group would retain flexibility to ramp up quickly to its 2019 production levels. First-quarter numbers were marginally ahead of expectations but there were concerns over the outlook for deliveries, which determine the group’s cash flow and earnings.
Mr Faury added that Airbus would continue cutting discretionary investment and fixed costs. The crisis has also led to the cancellation of the Efan-X, Airbus’s project with Rolls-Royce to develop an electric-power aircraft demonstrator. Faury added investment in low emissions technology would accelerate when recovery was clearer.