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

Rep. Larsen tours small businesses given federal PPP loans

The congressman said leaders in Washington D.C. continue to negotiate for further COVID-19 relief.

Boeing: No orders, more cancellations for grounded 737 Max

The company has lost more than 800 net orders so far this year.

Relieve the pandemic coin shortage: Bust open the piggy bank

The coronavirus lockdown means less metal is in circulation. Banks and merchants are desperate for change.

Glacier Lanes won’t be spared: Owners decide to close forever

Bowlers statewide are rallying to open venues shut by COVID rules, but this Everett business isn’t waiting.

Marysville sues Arlington over plan for 500 apartments

Marysville worries the major project on 51st Avenue NE will gum up traffic at a nearby intersection.

Snohomish County PUD embraces ‘smart’ meters despite concerns

A handful of customers said they were worried about privacy, peak-hour rate increases and safety.

Big new apartment complex anchors Broadway’s transformation

The seven-story, 140-unit Kinect @ Broadway is one of several facelifting projects in Everett’s core.

Pop into this Everett pop-up store for new vinyl records

Upper Left Records will offer albums from local bands and new pressings of classic recordings.

Everett’s new equity manager is ready to roll up her sleeves

In her new job, Kay Barnes will work to ensure that the city’s staff reflects Everett’s diversity.

Everett startup makes a swift pivot from in-person to online

Abacus links hobbyists, crafters and artists with people who want to learn new skills — virtually.

Dining in the street is now an official thing in Everett

With a free permit, businesses can expand outdoor seating to street parking areas — and fencing is provided.

FAA: Boeing pressured safety workers at S.C. aircraft plant

Federal officials are seeking to fine Boeing $1.25 million for practices related to 787 inspection oversight.