Airbus is battling to adapt to collapsing demand as the pandemic wipes out new aircraft sales and threatens existing orders as airlines run short of money
Faury said the company is aiming to survive without state support but that its customers and supplier base need as much help as they can get.
Airbus consumed an unprecedented 8 billion euros ($8.7 billion) of cash in the first quarter as chief executive officer Guillaume Faury warned of the “gravest crisis the aerospace industry has ever known.”
Some 3.6 billion euros of the cash hit came from a payment to settle a bribery case, eating up reserves while the planemaker grapples with the coronavirus outbreak, it said in a statement Wednesday.
Airbus is battling to adapt to collapsing demand as the pandemic wipes out new aircraft sales and threatens existing orders as airlines run short of money. Faury said the company is aiming to survive without state support but that its customers and supplier base need as much help as they can get.
“The crisis is really unprecedented,” he said on a call. “It’s hitting all regions of the globe and all industries at the same time so the role of governments is obviously key. One of the major risks for us is suppliers going bust.”
Airbus customer British Airways said Tuesday it will cut as many as 12,000 jobs, or close to 30% of the total, to help survive a downturn in travel that could last for years, while Deutsche Lufthansa AG is locked in talks with the German government over a multibillion-euro bailout and could seek court protection if it can’t reach a deal.
Shares of Airbus traded 2.5% higher as of 9:05 a.m. in Paris. The stock has declined almost 60% this year, as has arch-rival Boeing Co. The U.S. company, which has also been roiled by the long-term grounding of is 737 Max model, is due to report earnings later Wednesday.
Faury said measures taken by Airbus so far, which include cutting annual production by slightly over one-third and temporarily laying off more than 6,000 workers, may be just the start, and it will review the situation in June when there may be more visibility into the direction the crisis is headed.
Airbus is looking to furlough staff in Germany, and will put more French workers on leave. “The resizing of the company will be made not only looking at the minus 35% adaptation we’ve done recently but also the likely scenario moving forward,” Faury said.
Agency Partners analyst Sash Tusa said the cash outflow was worse than the 6.3 billion euros he’d predicted and leaves Airbus with just 3.6 billion euros in net cash.
The Toulouse, France-based manufacturer said it has reduced anticipated capital spending this year by about 700 million euros to ease demands on its sources. The company had already extended credit lines and clamped down on expenses to give it access to 30 billion euros.
While Airbus delivered 122 aircraft in the first quarter, the full impact of the coronavirus wasn’t initially felt, Faury said, though 60 planes couldn’t be handed over because of the outbreak. Deliveries in the second quarter “will be very low,” he said.
The company plans to ship about 600 jets this year based on its reduced build rates, down from a record 863 in 2019, though the tally may be cut further.
Suppliers will feel a squeeze in the second quarter when cash payments drop, and will then need support, the CEO said, especially since many are already under pressure after the idling of the Max reduced revenue from Boeing.
First-quarter adjusted earnings before interest and tax fell 49% to 281 million euros and the company swung to a net loss. Faury said the company is still assessing the implications of Covid-19 and can’t yet provide a financial outlook for the full year.
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