European aircraft manufacturer Airbus gave its starkest assessment yet of damage from the coronavirus crisis, telling the company’s 135, 00 employees to brace for deeper job cuts and warning survival is at stake without immediate action.
In a letter to staff, Chief Executive Guillaume Faury said Airbus was “bleeding cash at an unprecedented speed” and a recent drop of 30% or more in production rates did not reflect the worst-case scenario and would be kept under review.
Shares in Europe’s largest aerospace group closed down 2.4% on Monday after notching up the biggest falls on the Paris CAC40 index
Aviation commentator Howard Wheeldon said the letter showed the “realisation of little prospect of a large-scale order recovery any time soon”.
The letter was sent to employees days before the company is due to give first-quarter results overshadowed by a pandemic that left airlines struggling to survive and virtually halted jet deliveries.
Airbus is implementing government-assisted furlough schemes starting with 3 000 workers in France, “but we may need to plan more far-reaching measures,” Faury said.
“The survival of Airbus is in question if we don’t act now,” he added.
On Monday, Airbus furloughed 3 200 staff at its Broughton factory in Wales. Pressure to send workers home is driven in part by a stockpile of extra wings built in anticipation of disruption from Britain’s exit from the European Union.
Industry sources said a new restructuring plan similar to the company’s 2007 Power8 which saw 10 000 job cuts could be launched in the summer. Faury indicated Airbus was exploring “all options” while waiting for clarity on demand.
People familiar with the matter say Airbus is in discussions with European governments about tapping into schemes to assist struggling industries, including billions of dollars’ worth of state-guaranteed loans.
It lent its weight to calls for airlines such as Virgin Atlantic to be bailed out, believing manufacturing aid will defer the problem unless airlines survive.
Earlier this month, Airbus expanded commercial credit lines, buying what Faury’s letter called “time to adapt and resize”.
French union officials are preparing for a major restructuring in the summer and vowed to defend jobs.
To stem the outflow of cash, Airbus would slash benchmark narrow-body jet production by a third to 40 jets a month. It issued targets for wide-body jets implying cuts of up to 42% compared with published rates.
“In a couple of weeks we lost roughly a third of our business,” Faury wrote in the letter, first reported by Fly News in Spain. “Frankly, that’s not the worst-case scenario we face”.
Reuters reported on April 3 Airbus was looking at scenarios involving output cuts of up to 50% and analysts say US rival Boeing is expected to unveil comparable cuts along with lay-offs this week, lowering monthly 787 output to as low as six aircraft.
Faury said Airbus new production plan would remain for as long as it took to make a thorough assessment of demand, adding this would be between two and three months.
He said it was too early to judge the shape and pace of a recovery, but mentioned scenarios including a short and deep crisis with a fast rebound or a longer and more painful downturn with previous demand levels only returning in five or 10 years.
Analysts and airlines have so far spoken of a downturn lasting three to four years.
“Unfortunately, the aviation industry will emerge into this new world much weaker and more vulnerable than we went into it,” Faury wrote.