[Ref Flight International Magazine 12 – 18 May 2020]
The situation could hardly be worse for Airbus, Boeing and first-tier suppliers. But for companies further down the supply chain it is as they face a fight for survival as demand dries up.
As Covid-19 lockdowns and other restrictions begin to ease, and governments around the world try to nudge economies back to life, the problems for the multitude of small- and medium-sized enterprises (SMEs) that are the bedrock of the commercial aircraft industry are only beginning.
It is difficult to see demand returning any time soon, even if flying becomes theoretically possible.
GE Aviation, Meggitt, Rolls-Royce and Spirit AeroSystems are just some of the tier one suppliers to have announced major cuts to their workforces. Further down the chain, the job losses may not make the headlines, but the effect is arguably more threatening to business viability, as small companies, often heavily geared and dependent on one customer, have fewer places to hide.
Virgin Atlantic to cut over 3,000 jobs and cull 747-400 fleet
UK long-haul carrier Virgin Atlantic is to cut over 3,100 jobs and retire (“immediately suspend”) its Boeing 747-400s in an effort to address the financial pressure of the coronavirus crisis.
In addition, the airline still intends to retire four Airbus A330s, as previously planned, in early 2022.
Virgin Atlantic has been introducing A350-1000s, which are gradually replacing the operator’s A340-600s and 747s, and it is also set to acquire A330-900s.
Virgin Atlantic says the post-coronavirus recovery could take up to three (3) years.
While it is still holding “constructive” discussions with the UK government and other stakeholders, as it explores funding options, the carrier says it needs to reduce costs.
IAG to receive 68 fewer aircraft over next three years
British Airways and Iberia parent IAG now expects to take delivery of just 75 aircraft over the next three years, as it reduces its fleet requirements in line with expectations that passenger demand will not return to pre-crisis levels before 2023.
The new fleet plan marks a reduction of 68 on the 143 aircraft it had originally planned to take over the 2020-2022 period.
Passenger capacity has been cut by 94% since late March across the group.
IAG posted a €535 million ($578 million) operating loss before exceptional items in the first quarter – compared with a €135 million profit for the same period last year. That loss spirals to €1.86 billion when exceptional items relating to fuel and foreign currency hedges are included.
British Airways is planning for a meaningful return to service in July 2020 at the earliest, depending on the easing of lockdowns and travel restrictions around the world.
Actually, British Airways has already begun consulting on a restructuring programme which it warns could result in up to 12,000 job losses.
Rolls-Royce prepares to cut workforce as civil engine outlook slumps
Ryanair is expecting to cut up to 3,000 jobs from July and shut a number of European bases, as it projects that a post-crisis recovery will take at least two (2) years.
Ryanair is not expecting recovery of passenger demand to 2019 levels until at least summer 2022.