Airbus to reopen Spanish and French plants
Aircraft maker plans measures to limit risk of virus being spread among workers
Airbus will on Monday reopen its factories in France and Spain at lower initial production rates than before the closure, raising questions over future output as airlines seek to defer aircraft deliveries amid an unprecedented global crisis in aviation.
The group is also understood to have held discussions with the French and German governments about support for the aerospace sector. However, a person with knowledge of the situation said the company was not looking for direct aid in the short-term, although it would not ignore initiatives open to all industries to support the retention of workers. It was more concerned about the pressure on its suppliers, the person said.
In that context Airbus is pressing ahead with plans to keep production going even as its customers ground the majority of their fleets and seek to defer deliveries. Its French and Spanish factories were shut on Tuesday for four days to implement health and safety measures in the face of the spiralling coronavirus pandemic.
After days of discussions with French unions, which have been pushing to defer the reopening of the factories, the company will on Monday signal that it expects business to continue as usual, several people close to the situation said.
Nevertheless, measures taken to reduce the risks of spreading the virus — such as split shifts and changing the flow of work to increase distance between workers — would affect productivity in the early phase of reopening.
Analysts and investors have become increasingly convinced Airbus will have to cut rates of production — an important guide to expected cash flow — on both its widebody and narrow-body aircraft.
The decision to reopen after just four days at a lower rate was an important signal, said Sash Tusa, aerospace analyst at Agency Partners.
“This is the start of the rate cuts,” he said. The aircraft maker could not openly state that it was intending to lower rates, he suggested, as that would weaken its position in negotiations with airlines seeking to defer deliveries.
Airbus had targeted 880 deliveries for 2020, up from 863 in 2019. This now looks to be in doubt. The Financial Times reported this month that the European aircraft maker was reviewing its delivery targets for this year, although no decision was likely to be taken before the end of the first quarter.
Two people familiar with the company’s thinking said that even if first-quarter deliveries were lower than expected the group had a record of catching up in the second half to meet its target. But they admitted that the situation was changing so rapidly that there could be no guarantee.
Airbus is also preparing to invest more heavily in financing its customers in an attempt to keep the production lines working, said one senior executive.
Mr Tusa said that while Airbus might manage to deliver close to its target this year, he expected “a multi-year downturn, with production not returning to the levels of 2019 [863 aircraft] within our forecast period [to 2027]”.
Sandy Morris, aerospace analyst at Jefferies, is predicting deliveries will fall to 650 this year and 600 in 2021, which would have a severe impact on earnings and cash. He suggested Airbus’s home countries of France, Germany, the UK and Spain, could provide assistance to the aircraft maker and its suppliers by purchasing 500-600 passenger jets over three years.
“We estimate the cash spend at €28.5bn-€34.2bn,” said Mr Morris. “New aircraft are normally not bad assets to own. The aircraft would be delivered to airlines broadly as scheduled. Airbus deliveries might fall to around 600 per annum, but it can weather that, in our view.”