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Airbus says coronavirus is industry’s ‘gravest’ crisis

Airbus SE spent a record 8 billion euros ($8.7 billion) of cash in the first quarter as Chief Executive Officer Guillaume Faury warned of the “gravest crisis the aerospace industry has ever known.”

While almost half of the cash hit came from a bribery settlement, the abrupt drop in deliveries seen in March will worsen this quarter, eating further into reserves. By June, Airbus will have a better view of how far it needs to scale back to get through the coronavirus pandemic, Faury said Wednesday on a conference call.

Airbus is battling to adapt to collapsing demand as the pandemic wipes out new aircraft sales and threatens existing orders as airlines run short of money. Faury said the company is aiming to survive without state support but that its customers and supplier base need as much help as they can get.

“The crisis is really unprecedented,” he said on a call. “It’s hitting all regions of the globe and all industries at the same time so the role of governments is obviously key. One of the major risks for us is suppliers going bust.”

Customer British Airways said Tuesday it will cut as many as 12,000 jobs, or close to 30% of its staff, to survive a downturn in travel that could last for years. Deutsche Lufthansa AG is locked in talks with the German government over a multibillion-euro bailout and could seek court protection if it can’t reach a deal.

Airbus had been threatening to leave the US company in its wake before the COVID-19 crisis struck, with its rival hobbled by the grounding of the 737 Max model following two fatal crashes. The European company’s A320-family had already been outselling the Max, while adding range to target sales that would previously have gone to wide-body aircraft.

With demand in the doldrums and customers fighting for survival, the opportunity to press home Airbus’ advantage may have receded for now, Faury said. Over the longer term, he’s more optimistic, citing the smaller A220 narrow-body, which he said was well positioned for routes with thin demand.

“Our product range is the right one,” he said. “We think we’re doing the right things to go through the crisis and not jeopardize our main goal to compete again.”

Faury said measures taken by Airbus so far, which include cutting annual production by slightly over one-third and temporarily laying off more than 6,000 workers, may be just the start, and it will review the situation in June when there may be more visibility into the direction the crisis is headed.

Airbus is looking to furlough staff in Germany, and will put more French workers on leave.

“The resizing of the company will be made not only looking at the minus 35% adaptation we’ve done recently but also the likely scenario moving forward,” Faury said.

Agency Partners analyst Sash Tusa said the cash outflow was worse than the 6.3 billion euros he’d predicted and leaves Airbus with just 3.6 billion euros in net cash.

The Toulouse, France-based manufacturer has reduced anticipated capital spending this year by about 700 million euros, it said in a statement Wednesday. Airbus had already extended credit lines and clamped down on expenses to give it access to 30 billion euros.

While Airbus delivered 122 aircraft in the first quarter, the full impact of the coronavirus wasn’t initially felt, Faury said. Some 60 planes couldn’t be handed over because of the outbreak. Deliveries in the second quarter “will be very low,” he said, before rising in the third quarter.

The company plans to ship about 600 jets this year based on its reduced build rates, down from a record 863 in 2019, though the tally may be cut further Airbus reassesses around June.

Suppliers will feel a squeeze in the second quarter when cash payments drop, and will then need support, Faury said, especially since many that serve Boeing as well are already under pressure from the idling of the Max. (Bloomberg)


Source: Manila Bulletin (https://business.mb.com.ph/2020/05/01/airbus-says-coronavirus-is-industrys-gravest-crisis/)

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