Airbus prepares to launch restructuring and cost cuts.
Tom Enders, chief executive of Airbus Group, is preparing to launch a new restructuring and cost-cutting plan next month to offset expensive delays to aircraft programmes and minimise losses on the A380 superjumbo.
The restructuring will tighten Mr Enders’ grip on the civil aerospace division which accounts for 70 per cent of the European company’s revenues. He aims to eliminate duplication of certain functions between the aircraft subsidiary and its parent, as well as with other business units.
The plan has not yet been finalised but could include job cuts across the group. Talks with unions are expected to begin soon. The plans are a closely guarded secret but some managers have been warned that the restructuring is coming. “The writing is on the wall,” said one.
Another said that the restructuring was creating uncertainty. “We don’t know how things are going to work,” he said.
The pressure is on to make significant cost savings after the aircraft maker announced €1.4bn in charges at the interim stage to cover engine problems on its A400M military transport aircraft and supplier delays that threaten to hold back deliveries of the new A350 wide-body civil jet. Further charges are expected on the A400M programme once negotiations with government customers over a new delivery schedule are agreed.
The company has also been forced to slash production of its A380 superjumbo, which has struggled to win new orders. Having just managed to reach break even at gross operating level on the production of each aircraft, the reduction in output from 27 last year to 12 by 2018 will result in new losses. Mr Enders has promised that this will not be allowed to continue for very long, but Sandy Morris, aerospace analyst at Jefferies, estimates the programme as a whole will have generated losses of €350m by 2020.
Finally, the helicopter market continues to be weak, and one of Airbus’ most popular models was grounded after a crash in April.
Mr Enders said at the group’s interim results in July that he would be seeking savings. “We will also look into the structural set-up of the group to overlap synergies — further cost reductions, particularly between group [at] a corporate level and the divisional level,” he said in a briefing with analysts.
The pressures were exacerbated this weekend when Pratt & Whitney, the engine supplier, revealed that supplier problems would force it to cut deliveries of its new geared turbofan engine, which powers Airbus’s most popular jet, the single-aisle A320neo.
Teething issues with this first in a new generation of geared engines have left Airbus with several so-called “gliders” waiting in the hangars for P&W engines. Now the US engine maker appears to have lost control of its supply chain, as it ramps up production.
Qatar Airways has already cancelled two of its A320 deliveries in the wake of the technical problems, and is threatening to shift its $6bn A320neo order to Boeing’s rival single-aisle, the 737Max.
Airbus said on Sunday that it was sticking by its target of 650 aircraft deliveries, which would be met by delivering more of the current generation of A320 and postponing delivery of the jets powered by the new Pratt & Whitney turbine. The technical problems were “largely behind us” Airbus said, while the company was in discussions with its customers and Pratt & Whitney about the latest delays.