Airbus SE plans to pursue voluntary job cuts before seeking forced reductions, as it aims to bring down costs without inciting a political uproar in France and Germany, according to people familiar with the matter.
The European plane maker will mandate redundancies only as a last resort after looking at voluntary layoffs and early retirement across its manufacturing operations, said the people, who asked not to be named because deliberations are ongoing. The total is likely to range between 12,000 and 16,000 employees, estimates George Ferguson, a Bloomberg Intelligence analyst.
Caught in a demand downturn that could last as long as five years, Airbus must scale back quickly to stop cash outflows and regain its financial balance by year-end, chief executive officer Guillaume Faury warned in his latest letter to staff, seen by Bloomberg.
The magnitude of the crisis calls for “heart-wrenching decisions,” Faury said. “What this means in reality is a necessary downsizing of our business.”
Airbus has raised liquidity, slashed production and put factory workers on rolling furloughs since the coronavirus spread across the globe earlier this year. The Toulouse, France-based company has yet to put in place a plan for permanent job cuts.
It would be a first for a company that has only grown for decades, and the task is complicated by political sensitivities in its home countries of France and Germany, which have committed massive amounts of virus-response aid to aerospace and major airlines like Air France-KLM and Deutsche Lufthansa AGthat are big customers.
“We’re striving as a management team to find the right balance,” Faury said. The letter, following a communication in late April that struck a similar tone, is part of constant dialog with employees, said Stefan Schaffrath, a spokesman for Airbus in Toulouse. He declined to discuss specifics.
The company expects to give more detailed guidance to employees by the end of July, Faury said in the letter, reported earlier by La Tribune.
France and Germany are Airbus’s biggest shareholders, and political pressure in those two countries — along with the potential for labor unrest — will factor into Airbus’s decisions. French Finance Minister Bruno Le Maire has already said that forced staff reductions are a “red line” at Air France, which will make it tougher for the airline to regain its financial footing.
At Airbus, “I would expect cuts to be similar to the drop in build rates, so would expect they need to cut close to 30% to maintain profitability,” Ferguson said. “But that will be politically untenable and they will look to the need for more workers as the market recovers, and probably land closer to 15-20%.”—Bloomberg