“For the next two years – 2020/21 – we assume that production and deliveries will be 40% lower than originally planned,” Guillaume Faury, the chief executive officer of Airbus, told German national daily newspaper, Die Welt, on Monday, adding that output would normalize by 2025.
Faury said the COVID-19 outbreak resulted in Airbus losing 40% of its civil aircraft business. He said that instead of planning for higher production of commercial aircraft, capacity in output and labor must be reduced as the aviation industry is facing the worst crisis in its history.
Airbus had announced previously it was slashing output by a third on average. We noted in March, Europe’s aerospace giant was expecting production cuts of its A330 output amid waning demand for its most popular wide-body airliner.
In April, Faury told employees in a memo seen by Reuters that the company is “bleeding cash” and needs cut costs to weather the coronavirus pandemic storm.
“In April/May we were up to 80 % below our plan. Only 14 instead of 75 aircraft were delivered in April,” Faury said. “On the one hand, due to the travel restrictions, airline crews could not take delivery of their aircraft, on the other hand, there was no financial security at the airlines, but gradually it is getting better.”
Industry sources told Reuters a 40% cut in “single-aisle equivalent” output is expected to lead to layoffs and lower output capacity in jet making – the timing of the announcement could be in early July.
Sources said 14,000 to 20,000 jobs could be eliminated – they also said the plan could be unveiled as early as Wednesday when Airbus has called an emergency session with its union.
“It’s a brutal fact, but we must do it. It is about the necessary adjustment to the massive drop in production. It’s about securing our future,” Faury told Die Welt, while vaguely referring to restructuring details.
Faury doesn’t expect a recovery in output until 2025:
“After market studies and discussions with the airlines, we assume that the previous volume will be back by 2025 at the latest. We expect that the demand for single-aisle aircraft will pick up faster than for the large-scale models. We therefore currently expect the A320 family to gradually increase production from 2022/2023. We anticipate low demand for wide-body aircraft over the next five years, as there was already an oversupply on the market before the crisis. At some point, a large replacement wave is expected for the Boeing 777 and the Airbus A330, but it is still a long way off,” he said.
Airbus shares have already retraced 61.8%-Fib from the low of 2009 (EUR 7.19) to the high (EUR 139.40) seen in January.
Airbus CEO reiterated a similar warning that Boeing CEO Dave Calhoun made in April, indicating it would take 2 to 3 years for air travel growth to return to pre-corona levels, adding that long term growth trends could take even longer to recover.
“Based on what we know now, we expect it will take two to three years for travel to return to 2019 levels and an additional few years beyond that for the industry’s long-term trend growth to return,” he said.
To put things in perspective for readers, the world’s top commercial jet makers see no recovery in their business nor air travel for several years – the aviation industry supports 65.5 million jobs worldwide and supports $2.7 trillion (3.6%) of the world’s GDP.
With Airbus and Boeing in the dumps, air travel collapsed, and the travel and tourism industry decimated – don’t expect a V-shaped recovery in the global economy anytime soon.