Airbus struggles to balance its response

  • Aviation
  • Wednesday, 08 Apr 2020

Missing targets: An employee working at Airbus’ facility in Mirabel, Quebec. Airbus warned last month that it wouldn’t achieve its earnings goals this year, hinting it would slow output without providing specifics. — Reuters

TOULOUSE: The most dramatic contraction in civil aviation history poses a challenge for Airbus SE in how to balance its response.

Factories that churned out aircraft in record numbers before the coronavirus crisis face an unprecedented production cut. But retreating too far risks leaving the company wrong-footed in a rebound and diluting its advantage over Boeing Co.

Airbus warned last month that it wouldn’t achieve its earnings goals this year, hinting it would slow output without providing specifics. This week, the European planemaker reports orders and deliveries for March, the month that virus-induced lockdowns became a global phenomenon, grounding airline fleets in Europe and the US and forcing customers to defer acceptance of aircraft.

Demand was already flagging in February, when the coronavirus downturn was upending flight schedules in Asia.

Airbus failed to secure any new orders that month. Now customers and suppliers, from Deutsche Lufthansa AG to EasyJet Plc to Rolls-Royce Holdings Plc, are bearing the full brunt of what the International Air Transport Association has called the industry’s worst crisis.

That’s raising pressure on Airbus to give some of its most loyal buyers more flexibility.

The trick will be to pare back output on models like its A320 narrow-body workhorse, where production stood at close to 60 units a month, without going so far that suppliers will be starved out of business.

“If Airbus went into it at 60 A320s a month, they are very unlikely to even make 40, ” said Sash Tusa, an analyst at Agency Partners LLC in London, who is predicting the worst civil aerospace recession in a generation. “They will be making the decision now, but the rate cut will happen progressively over the next three to four months.”

Airbus said it’s identified a number of operational measures it can take to minimise its cash outflow. These will be activated “depending on the further development of the pandemic.” It had no further comment ahead of its disclosure of monthly orders and deliveries.

The company also holds its AGM next week, and may choose to save any comments on its output plans for that mostly online gathering. Last week, Airbus told employees that a return to full production was unlikely in the short term, after it temporarily idled facilities across Europe.

It said on Monday that German sites in Bremen and Stade would be paused for parts of April. A plant in Mobile, Alabama, where it makes A220 and A320 jets, is shut down at least through April 29.

Chief executive officer Guillaume Faury has preached patience, while building up a 30 billion-euro (US$32bil) liquidity buffer to get through the hard times. He said he’d base his decisions on facts and discussions with customers.

“I would not make judgments that would be too early, ” he said last month. “Sometimes we are wrong to be right too early.” — Bloomberg

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