Airbus close to slashing jobs as CEO confirms 40% output drop

Airbus (AIR.PA) was finalizing an imminent restructuring plan involving thousands of job cuts on Monday as its chief executive confirmed plans to hold output down by 40% for two years, reported Reuters.

Europe’s largest planemaker is likely to set out its largest-ever reorganization by Wednesday, union sources said at the start of several days of talks as the company deals with the impact of the coronavirus crisis.

Airbus, whose shares rose 2.4%, declined to comment.

The company is expected to move swiftly to counter damage caused by a 40% drop in its 55 billion euro ($61.8 billion) jet business following the pandemic, balancing the belt-tightening against aid being offered by European governments and future priorities.

It has said it will announce plans by end-July, but needs to begin a delicate process of briefing unions and governments on any job cuts before a two-week “quiet period” ahead of its July 30 results. In 2008, lay-offs sparked strikes and protests.

Political sources said Airbus seemed to have postponed the shake-up to avoid undermining the announcement in June of a French aerospace support package. But it wasted no time in preparing opinion after French municipal elections on Sunday.

“It’s a brutal fact, but we must do it. It is about the necessary adjustment to the massive drop in production. It’s about securing our future,” Faury told Die Welt, without commenting on details of any cuts.

Completing a grim backdrop, Faury confirmed that Airbus was planning for a two-year drop of 40% in jet output.

“For the next two years – 2020/21 – we assume that production and deliveries will be 40% lower than originally planned,” Faury told the German newspaper.

JOB CUTS

Output will return to normal by 2025, while depressed deliveries will catch up with production by end-2021, he said.

Reuters reported on June 3 that Airbus was looking to hold underlying jet output at 40% below pre-pandemic plans for two years as the basis for any restructuring.

It has until now said it was cutting by a third on average.

The latest figures do not imply any immediate new production cut after Airbus reduced output in April pending further review.

But industry sources say the 40% cut in underlying output, based on a weighted internal scale called “single-aisle equivalent” production, is driving the expected restructuring.

Sources have predicted phased cuts of some 14,000 jobs based solely on the 40% output index, which takes account of labour needed for different models, or 15,000-20,000 on a broader view.

Based on past exercises, such a scheme could cost somewhere between 0.8 billion and 1.2 billion euros, they estimated.

One person familiar with Airbus said cuts of anything below 25,000 could be seen as conservative in the light of output plans. Unions have promised to oppose any “overreaction”, however.

The Helicopter and Defence divisions, which manufacture some parts on behalf of the jetliner parent, will be affected.

Airbus is expected to rely partly on early retirements, with 37% of its 135,000-strong workforce due to retire this decade.

Its main plants are in France, Germany, Spain and Britain. Laws in some of those countries require voluntary schemes to be exhausted before forced redundancies. Faury told staff in April all available measures would be studied.