European plane maker Airbus SE issued a bleak assessment of the impact of the COVID-19 pandemic, telling the company’s 135,000 employees to brace for potentially deeper job cuts and saying that its 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 that a recent drop of one-third or more in production rates did not reflect the worst-case scenario and would be kept under review.
Airbus said it did not comment on internal communications.
Photo: Reuters
The letter was sent to employees late on Friday last week, days before the company is due to give first-quarter results overshadowed by the pandemic, which has left airlines struggling to survive and virtually halted jet deliveries since the middle of last month.
Airbus has begun implementing government-assisted furlough schemes starting with 3,000 workers in France, “but we may now need to plan for more far-reaching measures,” Faury said.
“The survival of Airbus is in question if we don’t act now,” he added.
Sources have said that a new restructuring plan similar to its 2007 Power8, which saw 10,000 job cuts, could be launched in the summer, but Faury said that the company was already exploring “all options” while waiting for clarity on demand.
People familiar with the matter have said that Airbus is also in discussions with European governments about tapping schemes to assist struggling industries, including state-guaranteed loans.
It has already expanded commercial credit lines with banks, buying what Faury described as “time to adapt and resize.”
To stem the outflow of cash, Airbus this month said it would slash benchmark narrow-body jet production by one-third to 40 jets a month. It also issued targets for wide-body jets implying cuts up to 42 percent, compared with previously published rates.
“In other words, in just a couple of weeks we have lost roughly one-third of our business,” Faury wrote in the letter. “And, frankly, that’s not even the worst-case scenario we could face.”
Airbus’ new production plan would remain for as long as it took to make a more thorough assessment of demand, Faury said, adding that this would probably be between two and three months.
He said that 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 after five or 10 years.
Analysts and airlines have so far mostly spoken of a downturn lasting no more than three to four years.
Rival Boeing Co, with even weaker finances due to the year-old grounding of its 737 MAX aircraft, on Saturday scrapped a US$4.2 billion tie-up with Brazil’s Embraer SA in a move widely seen as triggered by the pandemic, although it cited contractual reasons.
“Unfortunately, the aviation industry will emerge into this new world very much weaker and more vulnerable than we went into it,” Faury wrote.
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