Guillaume Faury, chief executive officer of Airbus, speaks during a media event at the Airbus Canada assembly and finishing site in Mirabel, Quebec, on Feb. 20. (Valerian Mazataud/Bloomberg)

Guillaume Faury, chief executive officer of Airbus, speaks during a media event at the Airbus Canada assembly and finishing site in Mirabel, Quebec, on Feb. 20. (Valerian Mazataud/Bloomberg)

Airbus CEO warns workers it’s bleeding cash and needs cuts

Both Airbus and Boeing are preparing for job cuts as they gauge the depth of the downturn.

By Charlotte Ryan and Siddharth Philip / Bloomberg

Airbus chief Guillaume Faury warned employees that the planemaker is “bleeding cash” 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, Faury told staff in a letter sent 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, he said.

“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,” Faury 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 company’s shares were trading down 1% at 9:25 a.m. in Paris on Monday.

The European manufacturer and its U.S. rival Boeing Co. 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 euros ($16.2 billion) to weather the crisis, while Boeing is in talks for U.S. aid. Both companies are preparing for job cuts as they seek to gauge the depth of the downturn and the pace of the recovery.

Boeing on Saturday walked away from a $4.2 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 reductions with its scheduled first-quarter earnings report on Wednesday. Its CEO 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 company’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’ve also been thrown into imbalance. Getting the math 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,” 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 manufacturer will ultimately have to cut production by a further 30% 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 euros for Airbus and $8 billion for Boeing, according to calculations by Melius Research analyst Carter Copeland. Airbus is also set to report quarterly results on Wednesday.

Airbus 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 Faury said that more far-reaching measures may be needed.

Talk to us

More in Herald Business Journal

Bill McSherry, vice president of government operations for Boeing Commercial Airplanes, walks back to his seat, Tuesday, Feb. 25, 2020, after testifying before the House Finance Committee at the Capitol in Olympia, Wash. The committee was hearing testimony on a bill introduced at Boeing's request to suspend the aerospace giant's preferential business and occupation tax rate in Washington state unless the United States and European Union reach an agreement on their long-running international trade dispute that would allow the lower tax rate. Last year, the World Trade Organization body ruled that Boeing received an illegal U.S. tax break from Washington state that damaged sales by European archrival Airbus. (AP Photo/Ted S. Warren)
A Boeing executive delivers good and bad news for Everett

The commercial headquarters could indeed come to Paine Field. But demand for big jets will not rebound quickly.

FILE - An American Airlines Boeing 737-823 lands at Miami International Airport, Monday, July 27, 2020, in Miami.American Airlines said Tuesday, Aug. 25 that it will furlough or lay off 19,000 employees in October as it struggles with a sharp downturn in travel because of the pandemic. Flight attendants will bear the heaviest cuts, with 8,100 losing their jobs.  (AP Photo/Wilfredo Lee, File)
American plans flights with Boeing 737 Max by year-end

Customers can see on American’s website the type of plane for any flight if they know where to click.

Patrick Ky, executive director of the European Aviation Safety Agency, in Amsterdam on Nov. 27, 2018. MUST CREDIT: Bloomberg photo by Yuriko Nakao.
Boeing Max judged safe to fly by Europe’s aviation regulator

A synthetic sensor to aid pilots when the mechanical angle-of-attack sensors fail is still two years out.

The Boeing factory at Paine Field in Everett. (Boeing Co.)
Could Everett become Boeing’s next jetliner headquarters?

The company is considering selling the Commercial Airplanes division offices at Longacres in Renton.

Cop turned pinup model in Gold Bar charged with $67K fraud

Brenda Cavoretto was injured when a dead body fell on her in 2012. She’s accused of overselling its lasting impact.

Washington unemployment rate drops to 7.8%

Most job growth occurred in leisure and hospitality, construction and other services.

Premera Blue Cross will eliminate hundreds of jobs as it seeks to cut costs sparked by the current economic downturn. (Submitted photo)
Mountlake Terrace-based health insurer Premera cuts 285 jobs

The layoff at Premera Blue Cross, prompted by the economic downturn, represents about 8.3% of its workforce.

FILE - In this Feb. 8, 2018, file photo, the logo for Twitter is displayed above a trading post on the floor of the New York Stock Exchange.  Twitter is imposing new rules, Friday, Oct. 9, 2020,  ahead of the U.S. presidential election, prohibiting people,  including candidates, from claiming an election win before it is called by either state election officials or two authoritative, national news outlets. (AP Photo/Richard Drew, File)
Twitter to pay $100,000 over Washington campaign violations

The company failed to maintain records related to ads that ran from 2012 through 2019.

FILE  - In this Sept. 30, 2020, file photo, a Boeing 737 MAX jet, piloted by Federal Aviation Administration (FAA) chief Steve Dickson, prepares to land at Boeing Field following a test flight in Seattle. Boeing says the pandemic will reduce demand for new planes for the next decade, long after experts expect a vaccine for COVID-19. The company updated its forecast of the airplane market on Tuesday, Oct. 6, 2020. It remains upbeat about long-term prospects driven by increasing air travel in Asia. Boeing, which along with Europe’s Airbus dominates the aircraft-building industry, has seen orders and deliveries of new planes crumble this year. (AP Photo/Elaine Thompson, File)
Boeing’s struggles continue: No jetliner sales in September

The company has suffered 448 cancellations for the Max and dropped another 602 orders from its backlog.

Valdis Dombrovskis, Vice-President of the EU Commission, speaks at a press conference in Berlin, Germany, following the informal talks of the EU Trade Ministers on Monday, Sept. 21, 2020.  (Bernd von Jutrczenka/Pool via AP)
Rule: EU can impose $4 billion in tariffs over Boeing support

Tax breaks for Boeing from Washington state were deemed to have unfairly harmed certain Airbus jets.

Kellie Shanahan loads Jacob McGovern's vehicle with his class tool bag at Meadowdale High School in Lynnwood on October 1, 2020.  (Kevin Clark / The Herald)
How do you teach auto shop remotely? Edmonds class finds out

For some local high school students, auto shop is the thing that keeps them from dropping out.

Newly certified teacher Shana Brown assists a student with a Zoom meeting, while overseeing a class of seven students, in the former warehouse space at Malicious Women Candles on Tuesday, Sept. 15, 2020 in Snohomish, Washington. (Andy Bronson / The Herald)
For some Snohomish County kids, a warehouse is a schoolhouse

Employers made space for students to attend virtual classes on-site. But at least one learning pod had to shut down.