Airbus plans to cut employees, the number of which is equivalent to a small city. The figure, the plane manufacturer said, will be 15,000. The reason is the sharp fall-off of commercial aircraft demand, brought on by the nosedive of travel. Rival Boeing Co. (NYSE: BA) has suffered similar pain.
While air travel has started a minor comeback, major airlines still have scores of planes that continue to sit empty on remote runways. Travel will have to rebound to pre-COVID-19 levels for these to go back in service. In the meantime, carriers do not need new planes. They have begun to cancel orders that would be delivered in the next few years.
Airbus’s complete rationale is that “This adaptation is expected to result in a reduction of around 15,000 positions no later than summer 2021.” Airbus is not in a position to salvage the layoffs due to its crippling financial situation. Commercial aircraft activity, it says, has dropped by 40% in the last few months. It is a surprise it is not worse.
Airbus CEO Guillaume Faury summed it up: “Airbus is facing the gravest crisis this industry has ever experienced.”
One measure of the depth of the trouble is Boeing’s stock. It has dropped 43% this year, compared to a decline of 4% in the S&P 500. It has grasped at aid from the U.S. government. Without the money, Boeing might flounder.
Further down the airplane manufacturing food chain, American airlines are in equally bad trouble and also have turned to the government for aid.
Airbus and Boeing are at the end of a set of dominos. As carriers fail, their situations become more dire. That means the cut of 15,000 may not be adequate as the year progresses.
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