Airbus Warns 15,000 Job Cuts ‘Not the Worst Case’ Scenario

(Bloomberg) -- Airbus SE Chief Executive Officer Guillaume Faury warned that a plan for 15,000 job cuts is “not the worst case” scenario facing the company in the battle to steer through the ongoing Covid-19 aviation crisis.

The move to eliminate 11% of global headcount is based on what the jetmaker expects to be the most likely pace of market recovery, the CEO said, namely that domestic air traffic picks up significantly by the end of 2020 and long-haul traffic rebounds by summer 2021. If that doesn't happen as predicted, the manufacturer will have to revisit its plans, Faury said in a phone interview.

If a second wave of Covid-19 emerges that hits airlines to a similar degree as in the first half of 2020, “we would have to adapt again,” he said. Airbus's current expectations for recovery are “the most likely scenario -- it's reasonable to believe with what we see -- but it's not the worst case.”

The job cuts are the largest since the European planemaker's creation two decades ago and go beyond what unions and staff were expecting. Yet Faury's warning suggests more pain ahead in the event of a virus resurgence, a development seen as increasingly more likely as cases, particularly in the U.S., continue to rise alongside a reopening of economies and borders.

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Airbus said late Tuesday the company will eliminate more than 10,000 positions across its main bases in Germany and France. Faury has said the group's output will be 40% lower than expected for two years due to a dramatic slump in demand for aircraft, and has previously warned it is bleeding cash.

About 1,700 jobs are set to go in the U.K., 900 in Spain and about 1,300 in other countries by mid-2021. Voluntary measures such as early retirement will be the main part of the process, with compulsory cuts a “last resort,” Faury said.

Airbus shares slid 3.9% to 61.03 euros as of 1:09 p.m. Wednesday in Paris, and have declined more than 50% this year.

Cautious Reopening

A forecast for international traffic to rebound by the middle of next year is in line with most airlines' plans, but countries remain cautious about reopening too quickly and ushering in another wave of infections. The U.K. will continue to quarantine arrivals from countries not on a pre-approved list, while the European Union has opted not to allow U.S. travelers to visit, saying the country's response to the virus has been insufficient.

Airbus has to “act fast” on cutting jobs partly because the future is so uncertain, said Faury. He added that the company is renegotiating contracts with airline customers, and will be focused on deliveries and cash-flow over orders for the next 12-24 months.

Caught in an aircraft-market slump that Airbus said could last three to five years, the company is striving to bring down costs while avoiding political and labor tensions in its home nations. In a letter to employees sent Tuesday, Faury called on staff to avoid “finger-pointing between colleagues along national or local lines.”

The plans will be subject to union agreement, and have already faced criticism from governments and labor force representatives. The French finance ministry called the cuts “excessive,” while German Economy Minister Peter Altmaier said he expects Airbus to ensure that no country will be favored or disadvantaged.

Faury acknowledged the difficulty of setting a single global strategy to restrict job losses when countries offer different levels of support to the sector, and said the U.K. is likely to see more voluntary departures as the country hasn't so far extended a furlough plan designed to help companies retain employees during the coronavirus lockdown.

He said he hopes to retain staff elsewhere through long-term furlough arrangements, but “there will be a lot of jobs lost because the workload is not there -- that's something we can't change.”

The planemaker has about 135,000 employees globally, with almost 81,000 of those in the hard-hit commercial-aviation division. In the U.S., Airbus rival Boeing Co. is in a similar predicament, and said in late April it would reduce its workforce by about 10%, or about 16,000 jobs, to conserve cash.

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