Airbus SE, now the world’s largest planemaker, could take more strict measures to cut more jobs because of a continued fall in demand for travel fuelled by the coronavirus pandemic, CEO Guillaume Faury <a rel="noreferrer noopener" href="https://www.youtube.com/watch?v=ezSjYXSbsDw" target="_blank">told</a> French radio station RTL Tuesday morning.



<h4 class="wp-block-heading">KEY FACTS</h4>



The European planemaker is already committing to cutting 15,000 jobs as air travel and orders from airlines have been ravaged by the coronavirus pandemic, with a number of layoffs made through a voluntary redundancy scheme.



But on Tuesday, Faury warned that voluntary redundancies may not be enough to reach that goal.



He added that he could not guarantee that compulsory redundancies would not happen in a bid to cut costs.



The CEO said that while airlines were not cancelling orders, they were delaying them as demand for air travel stays at a fraction of activity before the coronavirus and with many travel bans still in place, and lockdown restrictions returning to regions facing a second wave.



Faury said that had left airlines “in a more difficult situation after the holidays than what we were hoping.”



<h4 class="wp-block-heading">CRUCIAL QUOTE</h4>



Faury told RTL on Tuesday: “The situation is so serious, and we are faced with so much uncertainty, that I think no one can guarantee there won’t be compulsory redundancies if we’re to adapt to the situation, especially if it evolves further.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“On the other hand, what I say clearly is that we have a lot of work to do, we will do everything we can to avoid arriving at that point.” </blockquote>



<h4 class="wp-block-heading">BIG NUMBER</h4>



<a href="https://uk.reuters.com/article/uk-airbus-ceo/airbus-close-to-slashing-jobs-as-ceo-confirms-40-output-drop-idUKKBN2400I5" target="_blank" rel="noreferrer noopener">40%</a>. That’s how much Airbus is dropping its production by for the next two years, to offset the effects of the pandemic.



<h4 class="wp-block-heading">KEY BACKGROUND</h4>



Air travel has been one of the industries most severely hit by the coronavirus pandemic, with a number of global firms slashing orders from the world’s biggest planemakers including Airbus, and Boeing. In June, Airbus committed to&nbsp;<a href="https://www.theguardian.com/business/2020/jun/30/gravest-crisis-as-airbus-plans-to-cut-15000-jobs-1700-in-uk" target="_blank" rel="noreferrer noopener">cutting</a>&nbsp;15,000 jobs—or 15% of its global workforce—citing the coronavirus pandemic as the “gravest crisis” in the firm’s history. The extent of the impact on the aerospace giant was made clear in July, when it posted a nearly $2 billion loss in the first half of 2020, while new orders in the second quarter plummeted to just eight, compared with nearly 300 in the first three months of the year. While governments have doled out some&nbsp;<a href="https://www.iata.org/en/iata-repository/publications/economic-reports/cash-may-run-out-for-some-airlines-during-tough-winter-season/" target="_blank" rel="noreferrer noopener">$161 billion</a>&nbsp;in aid to airlines around the world, according to IATA, the next challenge will be keeping struggling airlines afloat during the winter months, which will likely be compounded by a second wave of the coronavirus and a likely repeat of some stringent lockdown measures.



<h4 class="wp-block-heading">FURTHER READING</h4>



<a rel="noreferrer noopener" href="https://www.theguardian.com/business/2020/jun/30/gravest-crisis-as-airbus-plans-to-cut-15000-jobs-1700-in-uk" target="_blank">&#8216;Gravest crisis&#8217; as Airbus plans to cut 15,000 jobs</a> (The Guardian)



by Isabel Togoh,Forbes Staff

FRANCE-AIRBUS-AEROSPACE-RESULTS

Airbus, The World’s Largest Planemaker, Warns Of More Job Cuts Because Of The Pandemic

Bombardier may be close to completing its exit from the airliner business, confirming Wednesday morning that it’s holding talks with Mitsubishi Heavy Industries to sell its once-mighty CRJ regional jet line. For Mitsubishi Heavy, which has struggled to make the climb from an aircraft component supplier to a jet maker, the deal may be less about the money-losing CRJ than acquiring its extensive service network.



Tokyo-based Mitsubishi Heavy is years behind schedule on the MRJ, a twin-engine regional jet that was initially expected to be launched in 2013 with Japanese airline ANA. With certification of the 90-seat version believed to be on track for 2020, acquiring the competing CRJ program would solve the knottiest remaining problem for Mitsubishi: product support and maintenance, says Richard Aboulafia, an aerospace analyst with Teal Group. “They have no experience at that, and no infrastructure,” he says.



The sale talks were first reported by&nbsp;<a href="https://theaircurrent.com/industry-strategy/mitsubishi-in-advanced-negotiations-to-acquire-bombardiers-crj-program/" target="_blank" rel="noreferrer noopener">The Air Current</a>.



Montreal-based Bombardier created the regional jet market in 1989 when it launched the CRJ, which was a stretched, 50-seat version of the Challenger business jet that it had acquired a few years prior when it first got into aerospace by buying the struggling aircraft maker Canadair from the Canadian government. With jet fuel cheap in the 1990s, U.S. airlines snapped up the CRJ to replace propeller-driven planes on short-haul routes serving smaller cities. Bombardier has sold 1,950 CRJs, but sales slowed in the early 2000s as oil prices climbed and airline consolidation shrank route networks.



Bombardier had 51 outstanding orders for the aging airframe as of March 31, a backlog that should be worked through by 2020. Bombardier refreshed the CRJ in recent years with a new cabin design, but its seventies-vintage General Electric engines are inefficient by modern standards, and it’s not clear if the plane could be retrofitted with newer ones.



What’s kept sales trickling along has been the persistence of so-called “scope clauses” in U.S. airlines’ labor contracts with their pilots, which restrict the major carriers from contracting with regional airlines for flights of planes above 76 seats and a maximum takeoff weight of 86,000 pounds. With the MRJ, Mitsubishi made a losing bet that the scope clauses would be relaxed by the time it came into service: the MRJ90 is too big to be used in the U.S. now. Embraer made the same miscalculation with its new E2 regional jet line.



Mitsubishi has been working on a 70-seat version, but that project is&nbsp;<a href="https://asia.nikkei.com/Business/Companies/Mitsubishi-to-turn-MRJ-into-cheaper-smaller-Space-Jet" target="_blank" rel="noreferrer noopener">reportedly</a>&nbsp;going through a redesign that could delay it until 2023.



United and Delta pilots are negotiating new contracts, and American and Southwest’s agreements are up in 2020, but it’s unclear whether the airlines will be able to win relaxation of the scope clause restrictions. &nbsp;&nbsp;



It’s also unclear whether Mitsubishi would want to keep producing the CRJ, scope clauses or no, given its unprofitability. The company could choose to fulfill current orders and wind it down, says Aboulafia.



Beyond the CRJ maintenance network, Mitsubishi could benefit from adding experienced engineers from the Bombardier program who could aid in developing the MRJ and in the complicated regulatory certification process.



Bombardier filed a lawsuit against Mitsubishi in October, alleging that former Bombardier employees had supplied it with trade secrets that would help the MRJ gain certification.



A sale of the CRJ line would be the sunset of an era of ambition for Bombardier, a snowmobile maker that expanded into rail in the 1970s and aviation in the 1980s with a series of acquisitions, but stumbled badly earlier this decade with an attempt to challenge Airbus and Boeing by developing a 100- to 130-seat jet, the CSeries,&nbsp;<a href="https://www.forbes.com/sites/jeremybogaisky/2018/11/06/bombardier-fights-to-regain-altitude/#132f91490d5d" target="_blank" rel="noreferrer noopener">that almost bankrupted the company</a>.



CEO Alain Bellemare, who came aboard in 2015, has sold off assets and raised new debt and equity to pare Bombardier’s heavy debt load,&nbsp;<a href="https://www.forbes.com/sites/jeremybogaisky/2018/11/06/bombardier-fights-to-regain-altitude/#132f91490d5d" target="_blank" rel="noreferrer noopener">aiming to slim the company down to its strongholds</a>&nbsp;in business jets and trains. &nbsp;



In 2018, Bombardier gave away a majority share in the CSeries to Airbus, which has rebranded it the A220. Airbus has the option to buy full control in 2025. This week Bombardier closed the&nbsp;<a href="https://www.forbes.com/sites/jeremybogaisky/2018/11/08/bombardier-selling-q400-turboprop-line-cutting-5000-jobs-as-it-moves-to-strengthen-balance-sheet/#350bb68e1736" target="_blank" rel="noreferrer noopener">sale of its Q Series regional turboprop line</a>&nbsp;to Longview Capital, and last month it announced that it would sell an aerostructures factory in Morocco and its Northern Ireland unit, which developed innovative composite resin technology used to make the wings for the A220.



For the CRJ program, Bombardier could fetch a similar price to its sale of the Q Series, which netted $250 million, says analyst Christopher Murray of AltaCorp Capital, and a deal could allow it to offload other contingent liabilities.



Bombardier shares rose 8.9% Wednesday morning to 2.14 Canadian dollars on the Toronto Stock Exchange. The stock tumbled 20% in late April after the company cut its 2019 sales and profit outlook due to delays and quality issues on multiple contracts at its rail unit. Bombardier said during its first-quarter earnings call last month that it would no longer commit to previously announced financial goals for 2020, including raising sales to $20 billion.



-Jeremy Bogaisky;Forbes Staff

Tag: airbus

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Airbus, The World’s Largest Planemaker, Warns Of More Job Cuts Because Of The Pandemic

Why Mitsubishi Heavy May Want Bombardier’s Money-Losing CRJ Regional Jet Line