Business Maverick

Airbus Begins Biggest Restructuring With 15,000 Jobs to Go

By Bloomberg 1 July 2020
Caption
An employee works on a section of fuselage inside the new Airbus SE A320 passenger aircraft family assembly line hangar in Hamburg, Germany, on Tuesday, Oct. 1, 2019. An escalating battle over aircraft subsidies between the U.S. and the European Union threatens to damage both sides, said Airbus Chief Executive Officer Guillaume Faury.

Airbus SE embarked on the most extensive restructuring in its history, setting out plans to cut 15,000 civil-aerospace jobs worldwide as it attempts to steer through the crisis brought on by the coronavirus pandemic.

The European manufacturer will eliminate more than 10,000 positions across its main bases in Germany and France, part of an 11% reduction in global headcount, according to a statement on Tuesday. Chief Executive Officer Guillaume Faury has said the company’s output will be 40% lower than expected for two years due to a dramatic slump in demand for aircraft, and has previously warned it is bleeding cash.

“The crisis the aviation sector is facing will be of a length and magnitude that calls for more structural and wide-ranging actions,” the CEO said in a video message. “We need to act now by adapting our workforce to reflect the new situation.”

Airbus will look to cut 1,700 jobs in the U.K., 900 in Spain and about 1,300 in other countries by mid-2021, the jet maker said. Voluntary measures such as early retirement will be the main part of the process, with compulsory cuts a “last resort,” Faury said.

Pandemic Fallout

The plans will be subject to agreement with the relevant unions, and faced swift opposition by the French government. The extent of the job cuts is “excessive,” the finance ministry said in a statement, adding that the company must do all it can to limit the number of forced retrenchments.

While the French government has been vocal in rejecting job cuts at companies in which it has a stake, including Renault SA, Air France-KLM and now Airbus, it has also acknowledged that revamps are needed in light of the economic shock. Air France is preparing to announce about 7,500 job cuts of its own. Airbus has about 135,000 employees globally, with almost 81,000 of those in the hard-hit commercial-aviation division.

Aircraft Slump

Caught in an aircraft-market slump that Airbus said could last three to five years, the company is striving to bring down costs while avoiding political and labor tensions in its home nations. U.S. rival Boeing Co. is in a similar predicament, and said in late April it would reduce its workforce by about 10%, or about 16,000 jobs, to conserve cash.

“This is a prudent move by Airbus because things will be very different post-Covid-19,” said Shukor Yusof, founder of aviation consulting firm Endau Analytics in Malaysia. “In the next two to three years, there are going to be more casualties among airlines.”

Unions criticized the move, with the IG Metall labor group dismissing the announcement as “short-sighted” and accusing Airbus of using the virus as a pretext for reducing the workforce. The Unite union, which represents Airbus’ U.K. workers, called on the British government to “step up to the plate” to protect the sector like their French and German counterparts.

“I know everybody would like to see me saying there will be no forced layoffs,” Faury said on a call with reporters. “I cannot exclude that at the end we will not get there. That’s the hard reality I don’t like, that probably governments and my social partners don’t like either.”

The executive added that government-support measures had already protected thousands of jobs and encouraged lawmakers to extend furlough plans. The French and German states have committed billions of euros to support the sector.

“There is a risk that Airbus initially pleases neither investors nor governments,” said Jefferies analyst Sandy Morris. Still, the restructuring should leave the company well-placed to perform when the sector eventually rebounds, he added.

The move marks the latest step in adjusting a business that had been expanding for more than a decade before the rapid spread of Covid-19 ushered in widespread travel bans and the subsequent grounding of airline fleets. While some countries are beginning to reopen borders, travel isn’t expected to return to pre-crisis levels before 2023 at the earliest, Airbus said.

There will be further cuts to the single-aisle production rate, said Faury, though he ruled out significant changes after the planemaker slashed output of its A320 model by one-third in April.

–With assistance from Rudy Ruitenberg, Tara Patel, Sophie Caronello, William Horobin and Kyunghee Park.

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