Chief executive Guillaume Faury told Airbus employees in a letter that the company is rapidly “bleeding cash”, which threatens the manufacturer’s existence.
The plane maker said on April 8 that it will slash production by a third, but Mr Faury told the workforce of 133,000 on Friday that the production cuts were not the worst-case scenario. Airbus has lost a third of its business in a matter of weeks, as the pandemic has hammered airlines’ revenue and made them reluctant to accept new jets.
“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,” Mr Faury wrote. “We must now act urgently to reduce our cash-out, restore our financial balance and, ultimately, to regain control of our destiny.”
Mr Faury wrote that the company has moved quickly to secure credit lines to adapt and resize the business.
Airbus declined to comment on the internal communication.
The aviation market is expected to shrink substantially following the Covid-19 crisis, an abrupt reversal from the future that forecasters at Airbus and rival Boeing envisioned just a few months ago. With airlines such as Virgin Australia in administration, and passenger demand not expected to recover to 2019 levels for years, many airlines are waiting to see what capacity they will need in 2021. Carter Copeland, a Melius Research analyst, wrote in a note that production rates at both aerospace manufacturers will fall 40 per cent in 2020 and 2021 compared to levels two years ago.
“For our adjusted 2020 production rates, we think aircraft construction already under way with (in many cases) pre-existing financing and sizeable advances can help support these delivery rates,” he said. “However, the longer that massive capacity reductions persist, the more we worry about the ability/desire of airlines to take aircraft deliveries in 2021.”
First-quarter cash flows at Airbus and Boeing are expected to break records. Mr Copeland is forecasting a €6.5bn outflow at Airbus, which includes a €3.6bn compliance fine, and $8bn at Boeing.
Earlier this month Airbus said it would go from making 60 single-aisle A320 jets a month to 40. It will shift from producing 10 midsize twin-aisle A350s a month to six, and drop to making about 24 A330 wide-body planes for the year, instead of the anticipated 40.
Boeing, too, is expected to cut rates. The company is looking for employees to accept voluntary lay-offs in exchange for severance, “to reduce the need for other workforce actions”, chief executive David Calhoun said in an April 2 message to employees.
Production cuts are expected to result in job losses at both companies.