Airbus chief warns 15,000 job cuts ‘not the worst case’ scenario

Airbus SE Chief Executive Officer Guillaume Faury warned that a plan for 15,000 job cuts is “not the worst case” scenario facing the company in the battle to steer through the ongoing Covid-19 aviation crisis.

The move to eliminate 11% of global headcount is based on what the jetmaker expects to be the most likely pace of market recovery, the CEO said, namely that domestic air traffic picks up significantly by the end of 2020 and long-haul traffic rebounds by summer 2021. If that doesn’t happen as predicted, the manufacturer will have to revisit its plans, Faury said in a phone interview.

If a second wave of Covid-19 emerges that hits airlines to a similar degree as in the first half of 2020, “we would have to adapt again,” he said. Airbus’s current expectations for recovery are “the most likely scenario—it’s reasonable to believe with what we see—but it’s not the worst case.”

The job cuts are the largest since the European planemaker’s creation and go beyond what unions and staff were expecting. Yet Faury’s warning suggests more pain ahead in the event of a virus resurgence, a development seen as increasingly more likely as cases, particularly in the U.S., continue to rise alongside a reopening of economies and borders.

Airbus said late Tuesday the company will eliminate more than 10,000 positions across its main bases in Germany and France. Faury has said the group’s output will be 40% lower than expected for two years due to a dramatic slump in demand for aircraft, and has previously warned it is bleeding cash.

About 1,700 jobs are set to go in the U.K., 900 in Spain and about 1,300 in other countries by mid-2021. Voluntary measures such as early retirement will be the main part of the process, with compulsory cuts a “last resort,” Faury said.

Airbus shares slid 0.9% to 62.96 euros as of 11:24 a.m. Wednesday in Paris, and have declined more than 50% this year.

Cautious Reopening

A forecast for international traffic to rebound by the middle of next year is in line with most airlines’ plans, but countries remain cautious about reopening too quickly and ushering in another wave of infections. The U.K. will continue to quarantine arrivals from countries not on a pre-approved list, while the European Union has opted not to allow U.S. travelers to visit, saying the country’s response to the virus has been insufficient.

Airbus has to “act fast” on cutting jobs partly because the future is so uncertain, said Faury. He added that the company is renegotiating contracts with airline customers, and will be focused on deliveries and cash-flow over orders for the next 12-24 months.

“This is a prudent move by Airbus because things will be very different post-Covid-19,” said Shukor Yusof, founder of aviation consulting firm Endau Analytics in Malaysia. “In the next two to three years, there are going to be more casualties among airlines.”

Airlines and their workers have been severely impacted by the initial impact from the travel slump, while suppliers like Airbus and engine maker Rolls-Royce Holdings Plc have also seen prospects dwindle. Air France is preparing to announce about 7,500 cuts, part of a total that surpasses 160,000 across European airlines, aerospace manufacturers and airports, based on data compiled by Bloomberg.

In the U.S., Airbus rival Boeing Co. is in a similar predicament, and said in late April it would reduce its workforce by about 10%, or about 16,000 jobs, to conserve cash.

Airbus’ plans will be subject to union agreement, and faced swift criticism from the French government. The extent of the job cuts is “excessive,” the finance ministry said in a statement, adding that the company must do all it can to limit the number of forced retrenchments.

The planemaker has about 135,000 employees globally, with almost 81,000 of those in the hard-hit commercial-aviation division.