Coronavirus hurting airplane manufacturers and suppliers


The pandemic is taking its toll on aerospace manufacturing, with Boeing saying it would halt production of most widebody jets and Airbus starting partial output after a four-day shutdown as suppliers cut jobs.

With airlines unable to fly because of demand collapse over fears of contagion, reinforced by air travel restrictions, planemakers and suppliers are under pressure to save cash to ride out a liquidity squeeze.

Moody’s cut its outlook for the aerospace and defence industry to negative from stable and warned when markets recover the damaged balance sheets of most airlines would hurt new aircraft demand.

Global passenger capacity fell 35% last week, the worst since the start of the crisis, according to data from airline schedules firm OAG, which sees deeper cuts in the coming weeks.

More than 2 500 planes have been grounded this year, data from Cirium shows, with taxiways, maintenance hangars and even runways at major global airports becoming parking lots.

On Tuesday, Asian jet fuel refining margins – the difference in value between raw crude and refined product – turned negative for the first time in over a decade, suggesting no recovery timeframe in sight for the aviation industry.

Large US carriers drafted plans for a possible halt in passenger air traffic, four officials said on condition of anonymity, though there is no plan in place and President Donald Trump is apparently not considering a domestic travel ban.

Boeing faces shutdown of key assembly lines for the second time in a year after halting production of its grounded 737 MAX aircraft in January.

Production of long-haul jets like the 787 and 777 in Washington State will pause for 14 days starting Wednesday, forcing the world’s largest industrial building, the giant Boeing wide-body plant at Everett north of Seattle, to fall silent.

As the crisis deepens, US lawmakers are considering changing some of about $58 billion in proposed emergency loans to the airline industry to cash grants to cover payroll costs, people familiar with the matter said.

Brazil’s Embraer, the world’s third-largest aircraft maker, would furlough all non-essential workers in Brazil where it builds regional jets and further measures could be announced.

Joining the list of temporary shutdowns is Bombardier, which is suspending Canadian business jet production, according to a source familiar with the matter.

Airbus called for strong government support for airlines and suppliers but stopped short of asking for direct aid for the company, which has secured an extra 15 billion euros ($16.14 billion) in commercial credit lines.

The European planemaker told officials privately it may need European government help if the crisis lasts, Reuters reported.

Norwegian Air which grounded most of its aircraft and temporarily laid off 90% of staff, secured an initial cash infusion of 300 million Norwegian crowns ($26.6 million) from government.

Industry executives said the biggest source of alarm was the global supply chain of thousands of suppliers severely hurt by abrupt stop-start movements in aircraft output. Many are severely stressed by the 737 MAX grounding.

The International Association of Machinists and Aerospace Workers said in a letter to Congress more than 500 000 US aerospace production jobs could be in jeopardy and called for a relief package including provisions protecting against layoffs.

Engine maker GE Aviation announced plans to cut its US workforce by around 10%, according to a letter to staff.

Montreal-based training specialist CAE is laying off 465 manufacturing workers and slashing executive salaries and capital spending.

German aircraft engine maker MTU Aero Engines would shut output in some European plants for three weeks.

The shutdowns are designed in part to allow for deep cleaning and re-organisation of factory workers, who must avoid working in clusters, slowing output.