Airbus is cutting aircraft production by a third in a move expected to trigger a wave of job losses across the global aerospace supply chain as airline customers fight to survive the impact of a virtual halt to international air travel.
The European aerospace group has confirmed it will slash production of its popular A320 single-aisle jet, as reported in the Financial Times last week, from 60 to 40 a month.
It will also cut production of the A350 midsized twin-aisle from about 10 a month to six, and produce only two a month of the A330 family of widebody aircraft against previous expectations of a total of 40 a year.
Investors watch production rates closely as a guide to future profits and cash flow. Guillaume Faury, chief executive, said the group had cut production to reflect the reality of demand and measures, such as deferring investment, would be taken to preserve cash.
“We are ramping down and protecting the balance sheet of the company,” he said.
The moves come as airlines around the world seek to defer or even cancel orders for aircraft amid government attempts to contain the spreading coronavirus by restricting air travel. This has left the majority of the world’s passenger jets grounded.
Airbus’s decision to cut production so substantially suggests that the company expects future demand to remain subdued for some time, bringing to an end more than a decade of ever-increasing production.
Mr Faury said he could not predict when rates would rise again, as there remained too much uncertainty about the duration of the crisis. “It is not unlikely things will get better in 2021 but we don’t know exactly when,” he said.
But analysts estimate that the severe downturn this year will leave the airline industry committed to at least 20 per cent more aircraft in the next few years than will be needed for an aviation market now expected to shrink substantially in the aftermath of the crisis.
Airbus’s US rival Boeing, which has had to halt production of its own 737 Max single-aisle after two fatal crashes, is expected to follow with its own production rate cuts in the coming weeks, several suppliers told the Financial Times.
Both manufacturers have closed factories temporarily to implement safety measures. The US company had indicated before the crisis that it would cut production of its 787 Dreamliner as the wide-body market was slowing, while production of the 777 family is also likely to be lower than previously expected.
Several big suppliers told the Financial Times that they would begin looking at factory closures and job cuts as soon as both aircraft makers had indicated their expectations for future production rates.
However, many will be wary of announcing job cuts while governments are providing payroll support to companies that have had to furlough workers during the crisis. “It will take a few months,” the supplier said. “We will have to wait for a time where we will not be seen as the bad guys.”
Airbus said the new rates would “meet customer demand while protecting its ability to further adapt as the global market evolves”.
The aircraft makers are concerned to keep production flowing through the supply chain to support many of the small but critical manufacturers who have invested for growth and will be under extreme pressure from the collapse in demand.
The European aerospace group also hinted that job cuts could be in the offing as a result of the new production rates.
“Airbus is working in co-ordination with its social partners to define the most appropriate social measures to adapt to this new and evolving situation,” it said in a statement.
Mr Faury, who took over as chief a year ago, said the impact of the crisis was unprecedented. “We are in constant dialogue with our customers and supply chain partners as we are all going through these difficult times together.”
