Airbus slashes production after €1.31bn loss in first half
Boeing also cuts aircraft production plans and warns of new job cuts as coronavirus devastates travel industry
Airbus pared back wide-body jet production after burning through an added €4.4 billion euros (Dh19bn/$5.2 bn) in the second quarter, retrenching further to safeguard cash while it waits out a collapse in demand for new aircraft.
The world’s biggest planemaker will now aim to produce five A350 aircraft a month rather than the six it targeted in April, it said in a statement Thursday. The company booked €900 million of Covid-19 related charges against earnings and said a future restructuring provision could total €1.6bn.
Airbus delivered 74 planes in the quarter, when global fleets were largely grounded, less than one-third of the year-ago tally. With travel set to remain below last year’s levels until 2024, the company nonetheless said it aimed to stanch cash outflows in the second half of the year.
“The impact of the Covid-19 pandemic on our financials is now very visible,” chief executive officer Guillaume Faury said in the release. “We have calibrated the business to face the new market environment.”
Cash burn for the quarter matched the level for the first three months, excluding a one-off payment to settle bribery claims, as the virus prevented delivery of 145 aircraft. Mr Faury said the the ambition now is to be cash neutral in the second half, before customer financing and any spending on acquisitions.
Airbus, which has logged just 25 orders since the end of January, posted an adjusted loss of €1.31bn for the first half before interest and tax, including the charge, compared with a €2.19bn profit a year earlier.
Revenue plunged almost 40 per cent, with the decline exacerbated by a three-week shutdown of assembly lines as the company took steps to guard against the virus and assessed the situation.
The update comes after rival Boeing announced a raft of new measures Wednesday to preserve cash and adapt to the shrunken market. The US company, which reported a $2.4bn quarterly loss, delayed the debut of its new 777X model, cut build rates for existing planes, said it will end production of the 747 jumbo, and mooted the shutdown of one of two plants that build the 787 Dreamliner.
Investors had braced for an awful quarter after Boeing delivered just 20 commercial jets in the three-month period, down from 149 a year earlier.
Boeing’s bill for the 737 Max flying ban was already approaching $20bn before the pandemic struck. The company took another accounting charge in the quarter to reflect the $551m it expects to pay customers for lost flying and other considerations.
Boeing had previously announced a 10 per cent workforce reduction, or approximately 16,000 jobs. The total cut will still be about one-tenth of employees since Boeing is hiring for its defense and space business.
Airbus’s ratcheting down of wide-body rates reflects scarce demand for the large aircraft that are used in long-haul services. The European planemaker left its other production rates unchanged, after slashing output to 40 planes a month for its popular A320 family in April. At the time, A350 output was trimmed by about 40 per cent to 6 per month, while the slower-selling A330 was cut back to two a month.
The company is embarking on the biggest restructuring in its history with plans to cut 15,000 jobs in the commercial aerospace division. Faury has meanwhile extended credit lines and clamped down on expenses to give access to €30bn to manage the pandemic.
Airbus said the UK Serious Fraud Office has requisitioned its GPT Special Project Management arm, to appear in court over a corruption-related charge.
Updated: July 30, 2020 11:19 AM