The situation at European aircraft manufacturer Airbus hangs in the balance. The global downturn in travel demand, which is expected to persist for several years, has seen the planemaker already cut production by around a third. Now it is looking to reduce 2020-2021 production levels by as much as 40% and doesn’t expect demand to return to normal until around 2025.
40% production cut
As the coronavirus crisis drags on, it’s not just airlines that are being impacted by the downturn in travel demand. Manufacturers like Airbus and Boeing are being forced to slash production rates, as airlines become less likely to need more aircraft. Previously, Airbus had cut production rates by around one third. However, the CEO of the manufacturer has now said that this number will, going forward, will be more like 40%.
In conversation with German publication Die Welt, chief executive Guillaume Faury said,
“We cannot disconnect from the development at the airlines. For the next two years, i.e. 2020/2021, we assume that production and deliveries will be 40 percent lower than originally planned.”
He went on to say that, over the past two months, deliveries were down 80%. In April, only 14 aircraft were delivered out of an expected 75. Faury noted that, due to global travel restrictions, some airlines were prevented from taking delivery – something Airbus has tried to mitigate with its new e-delivery service.
Faury says that the 40% production cut is in relation to the previously planned rates of 2020 and 2021. The ‘one third’ cut previously mentioned related to 2019’s levels. As such, it doesn’t represent an actual rate cut but is representative of a slowdown in comparison with the previously higher output rates that had been planned for this year and next.
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When will Airbus ramp back up?
Faury told Die Welt that, following their own studies of the market and discussion with airline customers, Airbus expects demand to return to previous levels by 2025 at the latest. He said that he anticipates demand for single-aisle aircraft to pick up faster than that for widebody jets.
As such, Airbus is putting plans in place to begin revitalizing production of the A320 family from 2022/23 onwards. He noted that the widebody market was already somewhat oversupplied before the crisis and that this market is not expected to pick up for some time. He said,
“At some point, a large replacement wave is expected for the Boeing 777 and Airbus A330, but it is still a long way off.”
Overall, Airbus is planning for production and deliveries to begin balancing out by the end of 2021. However, this will only be achievable with a production output of no more than 40 aircraft a month, representing a 40% decrease in the planned production rate.
Jobs are still at risk
The slowdown in production continues to put pressure on Airbus in terms of the workers it employs. With around 90,000 workers in the commercial aircraft division, there is widespread fear that huge job cuts could be coming. Up to 10% of workers could face the ax, representing around 12,000 – 15,000 jobs.
Faury confirmed that, by the end of July, the manufacturer would make an announcement about the future of its workforce. He said,
“We’re looking into ways to keep as many jobs as possible – but the mitigation solutions available to us won’t be enough. Again, we lost 40 percent of our civil aircraft business almost overnight. This number is huge. It’s a brutal fact, but we have to do it.”
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