Sydney, Montreal: The pandemic is taking its toll on aerospace manufacturing, as Boeing Co announced it would halt production of most widebody jets and Airbus SE restarted only partial output after a four-day shutdown as suppliers cut jobs.
With airlines unable to fly because of a collapse of demand over fears of contagion, reinforced by air travel restrictions, planemakers and their suppliers are under pressure to save cash to ride out a squeeze on liquidity. Moody’s cut its outlook for the aerospace and defence industry to negative from stable and warned that even when markets recover, the damaged balance-sheets of most airlines would hurt demand for new aircraft.
Demand disappears off radar
Global passenger capacity fell by 35 per cent last week, the worst since the start of the crisis, according to data from airline schedules firm OAG, which said deeper cuts were likely in the coming weeks.
More than 2,500 planes have already been grounded this year, data from Cirium shows, with taxiways, maintenance hangars and even runways at major global airports turning into giant parking lots. Large US carriers have drafted plans for a possible halt in passenger air traffic, though there is no plan in place and US President Donald Trump said on Monday he was not considering a domestic travel ban.
500,000The number of US aerospace production jobs that are now at risk
Boeing faces the shutdown of key assembly lines for the second time in a year after being forced to halt production of its grounded 737 MAX aircraft in January. Production of long-haul jets like the 787 and 777 in Washington state will pause for 14 days starting Wednesday, forcing the world’s largest industrial building - the giant Boeing wide-body plant at Everett north of Seattle - to fall silent for the first time in recent memory.
As the crisis deepens, US lawmakers are considering changing some of about $58 billion in proposed emergency loans to the airline industry to cash grants to cover payroll costs.
Democratic US lawmakers late on Monday proposed giving struggling US airlines and contractors $40 billion in cash grants that would not be paid back and would require significant new environmental, labor and other conditions.
Brazil’s Embraer SA, the world’s third-largest aircraft maker, said on Sunday it would furlough all non-essential workers in Brazil where it makes regional jets and further measures could be announced later this week.
Joining the list of temporary shutdowns is Bombardier, which is suspending Canadian production of business jets. Airbus chief executive Guillaume Faury had called for strong government support for airlines and suppliers, but stopped short of calling for direct aid for Airbus itself, which has secured an extra 15 billion euros ($16.14 billion) of commercial credit lines.
The European planemaker has, however, told officials privately that it may need European government help if the crisis lasts for several months.
Industry executives said the biggest source of alarm was the global supply chain of thousands of suppliers who would be severely hurt by abrupt stop-start movements in plane output.
Many are already severely stressed by the year-long 737 MAX grounding.
Engine maker GE Aviation announced plans to cut its US workforce by around 10 per cent, according to a letter to staff. GE’s aviation unit employed about 52,000 people globally as of 2019, with about half of them working in the US.
But analysts expressed doubts over the strength of future demand as the industry recovers from its worst crisis.
A global recession combined with the possibility that corporate travel does not recover could hamper a full recovery, said Martin Hallmark, a senior vice-president at Moody’s Investors Service. The ratings agency expects airline passenger volumes to fall by 25-35 per cent this year.