Leaked Airbus Memo Warns Cash Flow Could Threaten Its Existence

Amidst the coronavirus crisis, European aircraft manufacturer Airbus has issued an assessment of the impact on its business. In a letter to staff, CEO of Airbus, Guillaume Faury has said that the company was “bleeding cash at an unprecedented speed”. Since the stability and financial health of Airbus might be at stake, Guillaume has informed the staff of possible job cuts and salary reductions.

A330-800
Airbus is struggling to survive with many cancellations and delays in aircraft deliveries. Photo: Airbus

The letter was sent to employees on Friday, just a few days before Airbus is set to release the first-quarter results. With production halted since mid-March and reluctance from airlines to place new orders, it is apparent that the results are going to be very shocking and discouraging.

Here are noteworthy portions of the letter:

Advertisement:

Production

The current production rate of Airbus is between 30-35% lower than the initially planned numbers. In the last two weeks itself, Airbus has lost almost a third of its business. However, Faury said that the current situation is not even near the worst-case scenario. Due to declining passenger demand and prolonged travel restrictions, Airbus might face an unprecedented financial crisis in the coming days.

Revenues

Airbus is experiencing a significant imbalance between its costs and its revenues. It is spending a lot of money on its production and operations; however, it has not received a substantial inflow of cash. Fortunately, the company has secured a 15 billion euro credit after it decided to scrap its last year’s dividends.

Faury has conveyed the importance of this by saying:

[The credits] give us the flexibility and time to adapt and resize our business. But we must now act urgently to reduce our cash-out, restore our financial balance, and, ultimately, to regain control of our destiny.

MSN_6572_EasyJet250_StartB_02_hd_ready
easyJet is one of the many airlines to have delayed the delivery of its Airbus orders. Photo: easyJet

Supply Chain

The most significant impact on Airbus’ supply chain has been to its delivery segment. Airlines around the globe are struggling to survive, and this has scuttled their ability to take aircraft deliveries. The effect on the supply chain can last for years until additional passenger demand is instigated.

Jobs

Airbus had earlier asked many of its worldwide employees to take ten-days off in the middle of May. However, the current situation doesn’t allow Airbus to allow for much more leniency.  As a result of this, Airbus has partnered with many of its social partners to develop an unemployment scheme. Additionally, Faury has openly stated that in order to save the company, workforce reductions might be undertaken whenever required.

Long-term response

As far as future decisions are concerned, Airbus will analyze the market dynamics after the pandemic is under control and make the decisions accordingly. It will use available data and try to make predictions as to when the peak level of the industry might be restored. This will allow it to take a more realistic approach to solving its financial plight.

Leaked Airbus Memo Warns Cash Flow Could Threaten Its Existence 1
The A321XLR might be the most suitable aircraft for post-coronavirus demand. Photo: Airbus

It was earlier predicted that Airbus might be better placed than any other aircraft manufacturer, given its stronghold on the narrowbody market and adaptability to market changes. However, the reality is far from optimistic. For now, Airbus can only be patient and wait for the post-coronavirus period to bring about positive and adapted changes to its business.

Will Airbus survive the coronavirus impact? Let us know in the comments.

User Avatar

Ayush Syal

Journalist @ Simple Flying. Aerospace-Engineering Student, crazy about planes and football.

Related Articles:

Daily Aviation News Email

Sign up to our daily aviation news digest. Be in the know.

Read More

Related Posts

Leave a comment