Airbus slashes jet output to tackle coronavirus crisis
By Tim Hepher and Laurence Frost
PARIS (Reuters) – Airbus <AIR.PA> announced plans on Wednesday to cut jetliner production across the board after the coronavirus epidemic triggered aviation’s worst industrial crisis and drastically reduced deliveries to cash-starved airlines.
In its largest-ever production adjustment, the European manufacturer said it was reducing output of its best-selling A320 narrow-body family by a third to 40 aircraft a month.
It also cut production of larger wide-body jets with the A350 falling by about 40% to six aircraft a month, and the A330 family down by more than 40% to two aircraft a month, based on the most recently published Airbus production figures.
Announcing a parallel slowdown in new investments, Chief Executive Guillaume Faury said the cuts reflected the “new realities” of airlines, whose industry association warned this week of the loss of 25 million jobs dependent on air transport.
“We have no short-term cancellations in front of us, but we have a lot of requests for postponements and deferrals … for 2020 and sometimes 2021,” Faury told reporters. “That’s why we are decreasing our production rates.”
The move, which Airbus said represented an average output reduction of a third, came as data showed that March deliveries halved to 36 jets.
Reuters reported last week that Boeing Co’s <BA.N> European rival was considering sharp cuts in all models in the face of plunging demand, cash problems at airline customers and logistical difficulties in delivering aircraft.
Aviation has been hit worldwide by the pandemic.
Airbus has experienced particular disruption since France and Spain – two of its host nations alongside Britain and Germany – put populations in lockdown after March 17.
Since then, it has delivered just six aircraft. Total first-quarter deliveries fell 25% to 122.
Airbus produced a further 60 jets that it was unable to deliver because of the crisis, which has forced many airlines to seek postponements and prevented others from sending teams.
In some cases, sources say, Airbus has hired private jets to fly in customer pilots as commercial flights dwindled.
Although Airbus is cutting the official production target of its most-sold model by a third, actual output since the start of the crisis is lower and needs to recover in order to reach the newly adjusted rate, according to industry sources.
Airbus has had to pause work at several plants to adapt to social-distancing rules. Since then, it has struggled to restore previous production levels due to gaps in the supply chain, though suppliers say problems are easing.
Faury warned the aviation industry would face a different world once the crisis abated and declined to say how long the reduced rates would last. Airbus will review them once a month.
“It’s not unlikely that these rates will remain in place for some months and as we get more educated on the situation we will adjust,” he said.
He reiterated plans to cut costs including on the A350 programme, which is likely to fall back into loss after breaking even last year.
He predicted a wave of consolidation among suppliers. “We see that the airlines are badly hit, and we are badly hit, and the next wave is going to be the supply chain,” he said.
Airbus won 60 new orders in March and took 39 cancellations including a total of 15 A350s from Latam and Kuwait, data showed. Faury said none of the cancellations was directly related to the health crisis.
“But obviously the situation has changed completely, and I would not expect orders to be the name of the game for the next six, nine or 12 months.”
(Reporting by Tim Hepher and Laurence Frost in Paris and Piotr Lipinski in Gdansk; Editing by Jane Merriman and Matthew Lewis)