Amidst the coronavirus crisis, European aircraft manufacturer Airbus has issued an assessment of the impact on its business. In a letter to staff, CEO of Airbus, Guillaume Faury has said that the company was “bleeding cash at an unprecedented speed”. Since the stability and financial health of Airbus might be at stake, Guillaume has informed the staff of possible job cuts and salary reductions.
The letter was sent to employees on Friday, just a few days before Airbus is set to release the first-quarter results. With production halted since mid-March and reluctance from airlines to place new orders, it is apparent that the results are going to be very shocking and discouraging.
Here are noteworthy portions of the letter:
The current production rate of Airbus is between 30-35% lower than the initially planned numbers. In the last two weeks itself, Airbus has lost almost a third of its business. However, Faury said that the current situation is not even near the worst-case scenario. Due to declining passenger demand and prolonged travel restrictions, Airbus might face an unprecedented financial crisis in the coming days.
Airbus is experiencing a significant imbalance between its costs and its revenues. It is spending a lot of money on its production and operations; however, it has not received a substantial inflow of cash. Fortunately, the company has secured a 15 billion euro credit after it decided to scrap its last year’s dividends.
Faury has conveyed the importance of this by saying:
“[The credits] give us the flexibility and time to adapt and resize our business. But we must now act urgently to reduce our cash-out, restore our financial balance, and, ultimately, to regain control of our destiny.”
The most significant impact on Airbus’ supply chain has been to its delivery segment. Airlines around the globe are struggling to survive, and this has scuttled their ability to take aircraft deliveries. The effect on the supply chain can last for years until additional passenger demand is instigated.
Airbus had earlier asked many of its worldwide employees to take ten-days off in the middle of May. However, the current situation doesn’t allow Airbus to allow for much more leniency. As a result of this, Airbus has partnered with many of its social partners to develop an unemployment scheme. Additionally, Faury has openly stated that in order to save the company, workforce reductions might be undertaken whenever required.
As far as future decisions are concerned, Airbus will analyze the market dynamics after the pandemic is under control and make the decisions accordingly. It will use available data and try to make predictions as to when the peak level of the industry might be restored. This will allow it to take a more realistic approach to solving its financial plight.
It was earlier predicted that Airbus might be better placed than any other aircraft manufacturer, given its stronghold on the narrowbody market and adaptability to market changes. However, the reality is far from optimistic. For now, Airbus can only be patient and wait for the post-coronavirus period to bring about positive and adapted changes to its business.
Will Airbus survive the coronavirus impact? Let us know in the comments.