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Airbus in danger

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Airbus in danger

Old 23rd Sep 2020, 05:32
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Airbus in danger

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”.
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Old 23rd Sep 2020, 06:24
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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?
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Old 23rd Sep 2020, 07:29
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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.
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Old 23rd Sep 2020, 07:41
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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.
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Old 23rd Sep 2020, 08:42
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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.
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Old 23rd Sep 2020, 08:53
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For leasing companies it must be hell now.
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Old 23rd Sep 2020, 08:53
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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.
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Old 23rd Sep 2020, 08:54
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Nobody wants anybody to collapse.
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Old 23rd Sep 2020, 09:19
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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.
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Old 23rd Sep 2020, 09:49
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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.......

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Old 23rd Sep 2020, 09:57
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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?
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Old 23rd Sep 2020, 10:08
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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.
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Old 23rd Sep 2020, 11:10
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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.
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Old 23rd Sep 2020, 11:12
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Governments will finally help as they want to keep those structures they created. Not so sure about the UK and future Airbus.
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Old 23rd Sep 2020, 12:37
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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...
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Old 23rd Sep 2020, 13:11
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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
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Old 23rd Sep 2020, 13:29
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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.
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Old 23rd Sep 2020, 13:44
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the future

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?
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Old 23rd Sep 2020, 14:59
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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.
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Old 23rd Sep 2020, 15:30
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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.
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