By Doug Cameron and Andrew Tangel
The world's biggest aerospace companies outlined survival plans
that include thousands of job cuts and raising fresh funds as their
airline customers reeled from the coronavirus pandemic and the
near-collapse of global passenger air travel.
Boeing Co., rival Airbus SE and their engine supplier General
Electric Co. on Wednesday detailed their initial responses to the
crisis that has engulfed the industry after travel restrictions and
fear of flying grounded more than half the global jet fleet.
The once-booming aerospace industry has suffered one of the
fastest and sharpest changes in fortunes, forcing the manufacturers
on both sides of the Atlantic to prepare for a sustained period of
reduced demand for their planes that, optimistically, could take
three years or more to reverse.
"We will be a smaller company for a while," Boeing Chief
Executive Officer David Calhoun told investors Wednesday. Already
wounded financially by the yearlong grounding of its 737 MAX
aircraft, the company reported its second consecutive quarterly
loss alongside plans to cut jetliner production and shed 10% of its
160,000-strong workforce.
Mr. Calhoun outlined a modest near-term plan: catering to
airliner retirements instead of fleet growth, and holding off on
designing new aircraft. The airlines and leasing companies that
helped Boeing and Airbus build up a trillion-dollar order backlog
of more than 13,000 jets are already starting to cancel deals and
defer new aircraft until a hoped-for recovery in airline
travel.
Delta Air Lines Inc. and Deutsche Lufthansa AG, which have
already idled most of their jet fleets, are among the carriers that
have said they expect to emerge -- with government aid -- far
smaller than before the pandemic crippled the industry.
Airbus CEO Guillaume Faury said Wednesday the European plane
maker plans to "right-size" its business, embarking on a
wide-ranging cost-reduction effort and cutting jetliner production
initially by a third, having struggled in recent years to keep up
with demand for its planes.
Suppliers such as GE and Safran SA, which together make engines
for both plane makers and supply spare parts and interiors such as
aircraft seats, are also laying cutting costs and laying off
staff.
The International Air Transport Association, a trade group,
expects passenger air traffic to halve this year compared with
2019, ending a decadelong growth surge driven by low-cost airlines
and the demand in emerging markets.
Aerospace suppliers have been among the hardest hit by the
pandemic because grounded planes don't require as much maintenance
or spare parts. Larry Culp, GE's CEO, told investors that visits to
its repair shops will be down 60% in the current quarter from a
year ago.
"This is an unprecedented decline in the aviation market and is
likely to be challenging for a while," Mr. Culp said in an
interview Wednesday. "We are well aware that it may take a while"
for air travel to recover.
Boeing's services unit, which the company once envisaged would
triple in size to have $50 billion in annual sales, is also
suffering.
Airbus, which had been gaining market share because of Boeing's
MAX woes, was in better financial shape than its U.S. rival, and
said it can reshape without government support.
Boeing plans to raise cash and support a supply chain of about
17,000 companies. It burned through $4.7 billion in cash during the
latest quarter and said it is considering applying for federal
stimulus help, as well as borrowing more from private lenders. The
company didn't detail what type -- and how much taxpayer aid -- it
might seek in coming weeks.
Both plane makers said they were optimistic that airline traffic
would resume their long-term growth paths. They just don't know
when.
"We believe this industry will recover," Mr. Calhoun said, with
federal backing for the U.S. airline industry and overseas
government efforts providing crucial support for the broader
industry.
The planned production cuts outlined by Boeing and Airbus
provided suppliers with more certainty about short-term demand, and
the sector rallied on the plane makers' outlooks. Boeing, whose
shares have fallen 60% so far this year, closed up almost 6%;
Airbus rose more than 10%.
For airlines, the pace of recovery hinges on securing emergency
cash and addressing the patchwork of national travel restrictions
imposed as the pandemic ripped across the world.
IATA, the trade group, is coordinating a series of meetings with
governments this week to standardize policies such as the health
screening of passengers and staff at airports and onboard aircraft.
Some carriers, such as Lufthansa, are already requiring that
passengers and crew wear masks.
Airlines now expect barely 10% of pre-pandemic flying in the
current quarter. The busy summer travel season in which many
carriers usually make the bulk of their profits isn't expected to
herald much improvement, but carriers are starting to make
tentative plans for a resumption of flying later this year.
Domestic markets are expected to be the first to reopen, partly
because national flying policies can be coordinated and passengers
may be wary of traveling overseas. International routes that
typically use larger planes could take several years to reach
pre-pandemic levels, said Alexandre de Juniac, CEO of the IATA.
The production cuts reflect those expectations. Chicago-based
Boeing said Wednesday that by 2022 it will halve production of its
787 jetliner to seven a month and trim output of the larger 777,
which is typically used on longer routes.
Boeing plans to resume 737 MAX output this quarter at a low
initial rate, rising to 31 a month next year. It had planned to
produce about twice as many MAX jets before regulators grounded the
aircraft in March 2019 following two fatal crashes.
It is planning for regulators to clear the restart of deliveries
from the third quarter. The Federal Aviation Administration has
said it has no timeline for approving the MAX and would clear it to
carry passengers once the agency deems the aircraft safe.
Boeing, which employed 161,000 staff as of Jan. 1, said it plans
to reduce head count by 10% this year, including what Mr. Calhoun
said would likely involve involuntary cuts. The company, which is
also a major defense contractor, said most of the cuts would come
from its commercial-airplane and services arms.
Reduced plane deliveries and sales of spare parts combined with
the impact of temporary factory closures and the continuing impact
of the 737 MAX crisis led to a quarterly loss of $641 million.
Sales fell to $16.9 billion from $22.9 billion.
GE is cutting 10% of the 52,000 employees at its aviation unit
and plans to furlough thousands more. Mr. Culp said it would look
to make some of the immediate cuts permanent, while GE's aircraft
leasing business is preparing to repossess some of the 1,000 jets
in its fleet from customers who have fallen behind on payments.
Airbus plans to furlough staff in France, Germany and the U.K.
after eclipsing Boeing last year as the world's biggest plane maker
by deliveries. Airbus said its focus now is cash preservation, as
airline customers defer and cancel orders.
Airbus said it burned through EUR4.4 billion ($4.78 billion) in
free cash in the first quarter with the impact set to worsen in the
second. It reported a net loss of EUR481 million during the period,
compared with net income of EUR40 million a year earlier. Revenue
fell 15% to EUR10.6 billion.
"We think our capacity to compete and be strong on the long term
is intact, if not improved, as the impact of Covid-19 on our main
competitor, on top of the previous difficult situations they had to
manage, is probably making us stronger," Mr. Faury said.
First among Airbus's potential advantages is its A320 family of
jets -- a single-aisle rival to the Boeing 737 MAX -- including a
new long-range variant still in development. The two models once
competed fiercely for orders from airlines, which prized their fuel
efficiency and flexible range.
Boeing said the pandemic has complicated its own plans to
develop new aircraft. Mr. Calhoun said the company will have to
wait for a market recovery before designing all-new aircraft
tailored to airlines' needs: "It's going to take us a while to sort
that out."
--Benjamin Katz and Thomas Gryta contributed to this
article.
Write to Doug Cameron at doug.cameron@wsj.com and Andrew Tangel
at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
April 29, 2020 18:38 ET (22:38 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
General Electric (NYSE:GE)
Gráfica de Acción Histórica
De Feb 2024 a Mar 2024
General Electric (NYSE:GE)
Gráfica de Acción Histórica
De Mar 2023 a Mar 2024