Airbus in danger

[Bergerie1]

From today's Times

Airbus, the European aircraft manufacturer that employs and indirectly supports tens of thousands of jobs in British aerospace factories, is in danger of collapse, its chief executive said.

Speaking yesterday to the French media, Guillaume Faury said: “The crisis is existential. Our life as a business is potentially at risk if we don’t take the right measures.”

He added: “The situation is so serious, and we are faced with so much uncertainty, that I think no one can guarantee there won’t be compulsory redundancies if we’re to adapt to the situation, especially if it evolves further.”

Mr Faury said the shutdown of aviation markets meant that Airbus needed to cut a total of 15,000 jobs, or more than 11 per cent of the group’s workforce. In the UK Airbus said it needed to cut 1,700 jobs, 12 per cent of its 13,500-strong workforce, much of that in the group’s wing factory at Broughton in north Wales.

Many of those workers have spent the summer on the government’s furlough scheme. The knock-on effect has been felt at Rolls-Royce, an Airbus engine supplier, which is cutting thousands of jobs.

Compulsory redundancies would play very badly in France and Germany, where about 10,000 jobs will go, plus 900 in Spain and a further 1,300 around the world where Airbus has operations in the US and China.

The crisis has led to it halving production of the world’s bestselling short-haul aircraft, the A320, and the popular long-haul A350.

Mr Faury, 52, said that the issue was not that airlines were cancelling orders, but “airlines aren’t taking deliveries”.

[BDAttitude]

Somehow this industry is working very much different than others. Here either your deposit would be void or you rejoined the queue at the back.
Can someone shed light on the practices?

[procede]

There are basically a whole bunch of aircraft standing around that nobody can use. The problem for Airbus is that you cannot pluck feathers from a bald chicken (you cannot extract money from a near bankrupt airline) and no one else is looking for aircraft right now, so essentially there is no queue.

On a more positive note: Boeing is theoretically in a much worse state, as delays in the 737 Max (and the 787 and the 777X) means that airlines can cancel those orders without penalty. In practice this only makes a difference for the balance books, not for the cash flow.

[Less Hair]

Don't airlines pay tranches of their final sticker price during production milestones whenever the manufacturer has to buy parts from suppliers for the individual airframe? So manufacturers might end up with mostly their manhours not paid for and no spare parts and services needed.

[procede]

Airbus and Boeing were extremely eager to get orders in the books, so I doubt it. Also many banks and other companies are involved in financing aircraft, depending on the type of financing. In any case you can assume the only people making money right now are the lawyers going over the contracts.

[Less Hair]

For leasing companies it must be hell now.

[lucille]

What kind of person would say that Boeing being in a “worse state” is positive news?

The entire industry is on the verge of collapse its a terrible time for everybody. This pandemic has brought out the worst in human behaviour.

[Less Hair]

Nobody wants anybody to collapse.

[triplese7en]

Boeing, strange as it might seem, is in a much stronger financial position than Airbus, because they are far less reliant on the civil aviation market than Airbus is. 66% of Boeing's earnings come from commercial aircraft, as compared with 81% for Airbus. Boeing's earnings per share in 2018 were more than 4X that of Airbus ($18.05 vs $3.94), and operating cashflow was likewise more than 4X higher ($15.32 vs $3.51). Granted, those numbers were pre-737MAX debacle, but they had built a generous cash cushion for themselves, and no one is (yet) talking about an existential crisis for Boeing.

[wiggy]

Living not a million mies from Blagnac I think the feeling is yesterdays's statement was primarily aimed at softening up certain people (i.e; the French element of the workforce, the syndicats and politicians) to expect compulsory redundancies, possibly more so than a warning that as this stage the company is in imminent danger of collapse.

As Bergerie and others know making people redundant in France is a somewhat non-trivial event and groundwork needs to be done beforehand.......

[procede]

More positive than rock bottom isn't really positive and I think the rest of my story illustrates that it doesn't really matter at the end of the day. Both companies are too fundamentally important to fail and will continue to exist, be it in a much reduced size. The main issue is who is going to foot the bill: To what extent will it be the taxpayer, shareholders, lenders, airlines and/or the employees?

[krismiler]

Make things look much worse then they are, though they are pretty bad, hint at massive redundancies and beg for state aid.

When granted the aid, announce a reduced number of layoffs ie the actual number you need. Receive praise for saving jobs.

[Tartiflette Fan]

procede

In the years following the financial crash and bank rescues, it was said ( perhaps only explicitly in Europe ?) that in future,emergency funding would start with shareholders,lenders etc having to contribute and the state would be last.Given this current unique situation where just about every company is asking for support,it's completely up in the air (sorry! ) who may/may not be helped.

[Less Hair]

Governments will finally help as they want to keep those structures they created. Not so sure about the UK and future Airbus.

[ATC Watcher]

A year ago a senior Airbus guy in an international gathering said that Airbus would move the UK manufacturing plants in France and Germany if there were no commercial agreement with the EU , a.k.a. hard brexit possibility .
That was well before Covid, and a lot of factors changed since then but in today's situation it might come back on the table for other reasons. .I cannot see France or Germany Governments giving money to save non-EU jobs...

[JOSHUA]

Maybe not, but there’s a lot of skilled operatives that build Airbus wings, who are uk residents - I can’t see the uk wing manufacturing heading out there anytime soon

[Denti]

triplese7en

However, Boeing spent quite a bit of its cash cushion on stock buyback programs. But yes, it always has a much bigger military par of the company and that might indeed make it somewhat easier to weather the storm. And of course it is much easier, and especially cheaper, to fire people in the US than it is in many european countries.

[Bazzo]

after Mr Faury has sent all these people home (not just in the UK), who will build his aircraft when the Operators do decide that they want them? Or are all his Orders parked outside?

[Richard Dangle]

Living not a million mies from Blagnac I think the feeling is yesterdays's statement was primarily aimed at softening up certain people (i.e; the French element of the workforce, the syndicats and politicians) to expect compulsory redundancies, possibly more so than a warning that as this stage the company is in imminent danger of collapse.

As Bergerie and others know making people redundant in France is a somewhat non-trivial event and groundwork needs to be done beforehand.......

100% my exact first thought. Loads of this going on everywhere you look at the moment. Including by the UK Government and devolved powers yesterday. Seems like we live in a world incapable of hearing or speaking bluntly anymore. Every last thing has to be triple wrapped in B/S and "messaged" by half-truths, implications and smoke'n'mirrors.

[Pistonprop]

Bazzo

I think it will be a long time before there will be a strong enough demand for new aircraft to get back to the production levels of the pre Covid era. Just check the numbers parked up in Europe alone right now. Some airlines will inevitably cease to trade and this will leave a glut of second hand aircraft available at competitive prices, and some of these aircraft being relatively new.

[mopardave]

What about Rolls Royce..........is this RB-211 all over again? I'm not seeing a great deal of government support.:ugh:

[unmanned_droid]

I think it's worth noting that for the aerospace industry (of which I am a member in the UK, and haven't been in work for 6 months as a result) and all the other severely impacted sectors, the virus hasn't pushed them to the brink. Government actions have.

[Tartiflette Fan]

ATC Watcher

Well, do you think they would be willing to pay redundancy for all 13 000 workers, build a new factory somewhere and then train 10 000 new workers for an unspecified production start ? There seem to me to be far too many dangerous , expensive decisions for a new boss to make.In his place I would not be wanting to make huge, unnecessary bets on future outcomes;better to reduce the work-force by two thousand and keep production availability intact without risking any headlines like " Biggest financial catastrophe since A 380 cabling disaster "

[unmanned_droid]

It will be a drip-drip approach. I have no doubt that wing design, and then manufacture will be removed from the UK. It'll take 10 years or so - Wing design will go first. The posturing has been happening for a while now.

[Tartiflette Fan]

unmanned_droid

Perhaps, however I was replying to a comment that said France /Germany would not want tospend to support non-EU jobs: that money has to be spent now though, not years down the line.

[unmanned_droid]

Tartiflette Fan

Fair enough.

They would support the UK operations if required, as a fair few of the permanent employee engineers in the UK are from mainland european countries.

[Vat is Jetstream]

JOSHUA

And they may get EU working permits to build them abroad . "Auf Wiedersehen, Pet" True, was EEC, but Airbus will pull the strings and dump the third party country in the process. Pilots really are not that educated. Nor are our workers.

[kiwi grey]

I would expect the new Airbus wing factory to be in Poland, and the new design centre probably to be in Spain, but maybe France or possibly Germany.
The factory location will depend on local labour costs and incentives to build it in that place.
The design centre location will depend largely on a place the existing UK-based professional engineering workforce would find most attractive: Airbus will want to keep as many as possible of these people.
If I was Airbus, I'd offer the people I wanted a very attractive relocation package, including immediate EU Permanent Residency and 'guaranteed' EU Citizenship in the EU member country of their choice after three years. For the over sixties, a fixed term (4 to 7 years, maybe) agreement with a very large contribution to their superannuation fund as a 'terminal bonus' for running the whole period of the contract

I will be astonished if Airbus wings are still being designed or built in the UK by 2026

[ATC Watcher]

Kiwi grey : Nice speculation , but on your remark :guaranteed' EU Citizenship in the EU member country of their choice after three years.
Well it far more complicated than that , first each state has its own regulations for non-EU citizens naturalizations , some quite drastic , for instance Germany is minimum 5 years residency and a language test. Airbus cannot change laws...
Tartiflette Fan : Just to put things back in perspective ; this remark was made over a year ago during the first Brexit negotiations , possibly to influence EU/UK negotiators at the time to make a deal that would include Airbus interests.
On the German/French financial bail out money to Airbus, they contain certain conditions , not all public. But one for sure was to preserve as much as possible jobs in Toulouse and Hamburg, not in the UK
Another thing to consider in the equation , the current UK to Toulouse and Bremen physical transport of wings is costing quite a lot , by moving its manufacture near the assembly plants in the continent Airbus would save a significant amount too.

[ATC Watcher]

Do not forget the Spanish .But this could be a big poker game to influence the UK government to make a trade deal , or in getting the UK to give aid money to Filton and Broughton plants ? who knows.

On new good news today for Airbus , Ben Smith said it will take deliveries of all AFR/KLM ordered aircraft as they are part of their reducing emission plan that itself is part of the financial deal with the Dutch and French Governments . The new aircraft are 25% more fuel efficient than those they replace he said. .

[tcasblue]

If I were the UK workers, I would want to go on an immediate wildcat strike at the first hint of something being taken away.

Deal with the legal consequences later. If you know the goal of the company, make it massively expensive to do anything.

After all, the worst the company can do as a response is what they are planning to do anyways.

The best that they could do is to be too scared to get rid of a good team.

[Less Hair]

So you would force an immediate move instead of making it comfortable for them to stay?

[Tartiflette Fan]

I think it's worth noting that for the aerospace industry (of which I am a member in the UK, and haven't been in work for 6 months as a result) and all the other severely impacted sectors, the virus hasn't pushed them to the brink. Government actions have.

Are you aware of the restrictions imposed in Spain, France, Italy, Benelux, Aus/NZ and Japan ? Are they more or less "harmful" to aviation than British ones ?

[papabravowhiskey]

IIRC the Airbus wing manufacturing in the UK is all based around aluminium technology: if/when there is a change to composite materials for the next generation, that would be the logical time when a strategic decision could/would be made about where (ie the physical location) that investment would be made. However, tariffs could make a move of existing/replacement kit to another location more worth while in a shorter timescale.

[Tartiflette Fan]

IIRC the Airbus wing manufacturing in the UK is all based around aluminium technology: if/when there is a change to composite materials for the next generation,

Seems to be already underway.

"IComposites go to new heights on the A350 XWB

The application of carbon-fibre reinforced plastic reached new proportions with the A350 XWB, which boasts a significant application of composites throughout. For example, most of the A350 XWB's wing is comprised of the lightweight carbon composites, including its upper and lower covers. Measuring 32 metres long by six metres wide, these are among the largest single aviation parts ever made from carbon fibre."

[unmanned_droid]

Are you aware of the restrictions imposed in Spain, France, Italy, Benelux, Aus/NZ and Japan ? Are they more or less "harmful" to aviation than British ones ?

I didn't apply my comment to UK government only - restrictions are applied by government (to be clear, across the world).

[unmanned_droid]

papabravowhiskey

This is incorrect, we have been engineering composite primary wing structure for over 10 years. Strategic decisions have already been made about that - and not particularly in the UKs favour.

[Bazzo]

https://www.butenunbinnen.de/nachrichten/politik/airbus-corona-stellenabbau-protest-bremen-100.html