Airbus restructuring will mean huge job cuts

Airbus was finalising an imminent restructuring plan expected to include thousands of job cuts on Monday as its chief executive confirmed plans to hold output down by 40% for two years.

Europe’s largest planemaker could set out its largest ever reorganisation plan by Wednesday, union sources said ahead of meetings early this week with Airbus, which declined to comment.

Airbus needs to move swiftly to counter the damage caused by a drop of some 40% in its 55-billion-euro jetliner business during the coronavirus crisis, industry sources say.

It has said it will announce job plans by the end of July, but needs to brief unions and governments on any major overhaul before a two-week “quiet period” ahead of its July 30 earnings.

Chief Executive Guillaume Faury set out a bleak backdrop when he confirmed in a German newspaper interview that Airbus was planning for a two-year drop of 40% in jetliner output.

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

Output will return to normal by 2025, while depressed deliveries are expected to catch up with production by the end of 2021, Faury added in the interview published on Monday.

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 expected to drive the restructuring.

Sources have predicted phased cuts of between 14,000 and 20,000 jobs based on the 40% target, which takes account of the number of workers needed to build different types of jetliner.

One person familiar with the Airbus layout said anything below 25,000 cuts could be seen as conservative in the light of output plans. Unions have warned against over-reaction, however.

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

Faury did not comment on specific restructuring plans but said the company would leave no stone unturned to reduce costs.

“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.

Airbus is expected to rely heavily on early retirements, with some 37% of its total workforce of 135,000 scheduled to retire over the next decade.

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

Separately, Boeing’s 737 MAX plane could begin key recertification flight tests as soon as Monday, a crucial step for the survival of a top-selling plane that has been grounded for more than a year following two fatal crashes.

Tests of the MAX “could begin as early as tomorrow, evaluating Boeing’s proposed changes to the automated flight control system on the 737 MAX,” the Federal Aviation Administration said in a message to lawmakers on Capitol Hill Sunday.

“Testing is expected to take several days, and will include a wide array of flight maneuvers and emergency procedures to enable the agency to assess whether the changes meet FAA certification standards.”

A Boeing spokesman said Monday the company would defer to the FAA on the mechanics of the test, including timing. The FAA did not respond Monday to queries. The MAX has been grounded globally since March 13, 2019, following an Ethiopian airlines crash that killed 157 people. That catastrophe came just a few months after a Lion Air MAX crash that killed 189 people.

The troubling similarities between the two accidents, both of which occurred shortly after takeoff, along with the pilots’ inability to regain control of the plane, led global aviation authorities to ground the model indefinitely.

For months, the US aviation giant has been struggling to get its medium-haul aircraft -- whose sales were its main source of revenue before the grounding -- back into service.

The model’s anti-stall flight system, the MCAS, was partially to blame for both crashes. But other technical malfunctions, including one involving electrical wiring, were subsequently detected during the aircraft’s modification process, slowing down its recertification.

Agencies