Airbus CEO warns workers it is bleeding cash and needs cuts

0 2

PARIS • chief Guillaume Faury has warned employees that the planemaker is “ ” and needs to quickly cut costs to adapt to a radically shrinking aerospace industry.

With airline customers fighting to survive and unable to accept new aircraft, Airbus is juggling its delivery schedules while reassessing its long-term outlook for the aerospace industry, Mr Faury told staff in a letter sent on Friday and seen by Bloomberg News.

A plan to slash production by one-third announced earlier this month may not reflect the worst-case scenario. “We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,” he wrote. “We must now act urgently to reduce our cash-out, restore our financial balance and, ultimately, to regain control of our destiny.”

Airbus declined to comment on its internal communications.

The European manufacturer and its United States rival Boeing are trying to come to grips with a plunge in demand caused by the coronavirus pandemic that’s rocked a commercial aerospace industry they dominate.

Airbus has increased its liquidity by €15 billion (S$23 billion) to weather the crisis, while Boeing is in talks for US aid. Both firms are preparing for job as they seek to gauge the depth of the downturn and the pace of the recovery.

Boeing on Saturday walked away from a US$4.2 billion (S$6 billion) plan to combine its jetliner business with Brazil’s Embraer. The Chicago-based company is expected to cut Dreamliner output by about half and announce workforce cuts with its scheduled first-quarter earnings report on Wednesday. Its chief executive officer has warned of a “new reality” as he assesses the rapidly changing market.

Airbus came into the crisis healthier, and the collapse of Boeing’s Embraer deal strengthens the European firm’s advantage in the important market for narrow-body aircraft, where volumes have been much higher.

Still, as with airlines, the crisis represents a mortal threat to the planemakers and their vast constellation of suppliers who have also been thrown into imbalance. Getting the maths right on how far to cut back will determine the manufacturers’ health when a smaller industry emerges from the ruins.

“The aviation industry will emerge into this new world very much weaker and more vulnerable than we went into it,” Mr Faury said. The company chief has said that Airbus plans to assess production on a monthly basis as it seeks to take a realistic view of what is likely to be a long-lasting crisis.

Agency Partners analyst Sash Tusa expects the European maker could ultimately cut production by a further 30 per cent to match the likely fall in demand for aircraft over the next two to three years.

Conserving cash is key. The two planemakers likely burned through record amounts in the first quarter: €6.5 billion for Airbus and US$8 billion for Boeing, according to calculations by Melius Research analyst Carter Copeland.

Airbus is also set to report quarterly results on Wednesday. It has already postponed plans to add another assembly line for the A321 narrow-body at its headquarters campus in Toulouse, France, and slowed the ramp-up of its newest jet, the smaller A220 single-aisle.

On Friday, the company mothballed its E-Fan X project with Rolls-Royce Holdings for hybrid-electric powered aircraft.

The company has taken actions such as furloughing about 3,000 French staff, though Mr Faury said that more far-reaching measures may be needed.

Leave A Reply

Your email address will not be published.