Airbus is ‘bleeding cash’ as coronavirus lockdown threatens survival
Image credit: G.R. Mottez | Unsplash
European plane-maker Airbus has warned all staff that more job cuts may be necessary to ensure the company's survival.
With many of its customers fighting to survive themselves and unable to accept or order new aircraft, Airbus desperately needs to cut costs in order to adapt to a dramatically shrinking aerospace industry.
In an internal letter sent to all staff, Guillaume Faury, Airbus' chief executive, laid out a bleak picture of the company's current financial position and immediate future, with the coronavirus pandemic and global lockdown decimating its revenues.
Faury told staff that the plane maker was “bleeding cash at an unprecedented speed, which may threaten the very existence of our company” and was considering all options as it waited to see how badly demand of both its business customers and flight passenger numbers would be affected by the Covid-19 outbreak.
“We must now act urgently to reduce our cash-out, restore our financial balance and, ultimately, to regain control of our destiny,” he added.
The aviation legend warned its 135,000 employees that it may not survive the coronavirus lockdown unless it takes immediate action that may involve deeper job cuts.
Airbus has already taken advantage of government schemes, including a furlough programme in France to help pay nearly 3,000 local workers during the lockdown. It has also convinced banks to increase its line of credit, giving the airline “time to adapt and resize”. It is also considering other financial assistance including government-backed loans, according to Reuters.
However, Faury warned that the group “may now need to plan for more far-reaching measures” to stay afloat. “The survival of Airbus is in question if we don’t act now,” he wrote.
Airbus had already advised investors that it would cut the number of planes it produces by a third, due to the ongoing global travel restrictions. Monthly production was typically 60 or more of its most popular Airbus A320 model, but has now reduced that to 40. It will also reduce production of its A330 planes to two and A350s to six per month.
“In just a couple of weeks we have lost roughly one-third of our business. And, frankly, that’s not even the worst-case scenario we could face,” Faury said.
The firm employs approximately 13,500 staff in the UK, most of whom manufacture plane wings at two sites - in Broughton, north Wales, and Filton, Bristol. Thousands more UK jobs are also indirectly linked to Airbus in the supply chain and related industries.
Airbus could confirm its immediate plans as early as Wednesday, when the company is due to release its first-quarter earnings.
A spokesman for Airbus declined to comment on internal communications.
Before the pandemic, Airbus had been enjoying a relatively buoyant period while its main rival, US-based Boeing, struggled with the ongoing worldwide grounding of its flagship 737 Max passenger jet, which had been its best-selling plane, following two high-profile, devastating fatal crashes.
Now, both companies are scrambling to stabilise as the near-total shutdown of the aerospace industry lays waste to their original plans for 2020.
Similar to Airbus' reduction in manufacturing output, Boeing is expected to cut Dreamliner output by around half and announce reductions in its workforce this week. Boeing CEO Dennis Muilenburg warned of a “new reality” facing the industry in a rapidly changing global market.
Faury acknowledged this uncertain future, saying: “The aviation industry will emerge into this new world very much weaker and more vulnerable than we went into it”.
Airbus said it intends to assess production on a monthly basis in future, as it takes a realistic view of what is likely to be a long-lasting crisis running into the next two to three years.
Already, it is estimated that the two companies have burned through record amounts of cash in the first quarter of 2020: €6.5bn for Airbus and $8bn for Boeing, according to calculations by Melius Research analyst Carter Copeland.
Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.