Guillaume Faury sees the existence of the aircraft manufacturer under threat. The CEO has to adjust Airbus to lower capacities faster than two weeks ago.
Two weeks ago, Airbus chief Guillaume Faury warned in an interview with the Handelsblatt: “The pace of decline is unprecedented.” The corona crisis is driving many airlines into a situation in which they would be almost completely without income.
It’s no wonder that they put their orders into the duopoly of manufacturers, airbus and Boeing, rethink and cancel if necessary. Faury pointed out that the duration and severity of the crisis cannot yet be predicted. But the company is so solid in terms of liquidity and balance sheet that it hopes to get through the crisis without state capital aid.
Now the situation has worsened. In a letter to employees that Reuters publishes, Faury writes: “We are bleeding out financially at an unprecedented rate.” This situation could “question the existence of the company.” The analyst Carter Copeland from Melius Research calculates one for Airbus Cash outflow of 6.5 billion euros in the first quarter. This includes € 3.6 billion in fines for the corruption scandal, which was recently resolved without trial.
Airbus and Boeing sit on filled order books. The numerous orders had caused manufacturers to increase their production rates in recent years. If possible, the airlines will also take these ordered jets off the aircraft manufacturers because they have already made down payments. Airbus cut the A320 bread and butter plane rate in March because “only” by a third – from 60 machines a month to 40.
But in 2021 it could be really bitter for the duopoly. International air traffic will not recover so quickly. Demand for the largest and most expensive planes is likely to continue to decline, and the smaller, but basically long-distance jets are also threatened with massive slumps. Many airlines will wonder whether they really need so many machines before the corona crisis – and whether they can pay for them.
Even good Airbus customers like the Asian airlines are rethinking their capacity plans today. At Lufthansa and Air France-KLM it looks really dark. Both only get through the crisis with state aid: first there will be loans, then possibly a state capital participation.
Cutbacks won’t spare a location
Faury, a trained engineer, wants to avoid them, if possible, he told the Handelsblatt: He hopes to get through on his own. Faury has only been serving as CEO and member of the board since early 2019. Now he has to change the company from expansion to shrinking.
The employees have already been prompted to melt their time accounts. Short-time work has started. In France, 3000 employees are affected, in Germany the concrete number has not yet been determined. Only this much: The cuts will not spare any location. But that won’t be enough, signals Faury’s dramatic choice of words. He speaks of “threatened existence”. It is the capacity that must be permanently reduced.
This is a risky maneuver because supply chains could break. Various suppliers may not be able to sustain significantly reduced production – especially since they were still asked at the beginning of the year to invest in expanding their capacities. It is conceivable that some of them would end up in the arms of Chinese competitors, which could rapidly improve their lower technical competence.
Faury balances, as he describes it himself, on a thin rope: he has to reduce costs and, above all, stop the outflow of liquid funds. However, it must not jeopardize Airbus’ future viability: All governments are urging them to push for more climate-friendly products after the corona crisis.
For Faury, this means costly investments in fuel-saving aircraft. “We are constantly adjusting,” he describes his approach. On Wednesday he will report where the company is: Then he will present the figures for the first quarter.