Airbus May Go for Up To 10% Job Cut Due to Covid-19 Induced Crisis

The novel coronavirus has drastically impacted all the business segments, especially the aviation sector, which is completely out of business for over the last two months. The lockdown imposed by the different countries across the world has pushed the aviation companies for job cuts as they do not have money to pay the salaries, even though the governments have announced furlough scheme to support them. As per the initial estimates of the UN labour organisation in March 2020, it has reportedly been said that around 24.7 million jobs across the globe could be in danger due to novel coronavirus. The United Nations' labour organisation has also stated that this time is the worst-case scenario for the international job loss but also highlighted that global-coordinated policy could show substantially lessen the effect on this.

Many of the companies are seeking the way to minimise the expenses, and job cuts are one of the key measures apart from salary reduction. As per some reports and market experts, the job cut this time is more significant as compared to the global financial crisis of the year 2008, in which around 22 million jobs were cut. Recently, International Labour Organization (ILO) had stated that around 25 million jobs could be lost due to this pandemic, terming it the worst-case scenario of global unemployment, however, it also stated that concerted efforts and coordinated global response to the situation could lessen the impact.

During such a situation, Europe's largest aerospace group, Airbus is considering major restructuring plans which consist of many jobs cuts as the company is suffering from cash crunch and is finding it difficult to survive in the novel coronavirus crisis. The company had reportedly warned in late April that cash of the company is depleting very fast, which can result in jobs reduction of around 0.14 million global workforces. The Chief Executive officer of the company, Guillaume Faury will probably inform about the decision to the managers on May 14 that company's existence was at stake because of the sharp reduction in the demand. The company presently is largely dependent on government-supported furlough schemes in Britain France and Germany to minimise its costs and had even asked employees to take ten days leave.

Airbus, the largest supplier of the planes to the airlines’ industry, is under severe financial stress due to the cancellation of the majority of flights. However, the aviation companies cannot take any decision on restructuring before consulting the trade Unions as per the existing law of France, so it will take time to complete this process.

In April 2020, another aviation sector behemoth, Boeing had announced the cost-cutting measures which included several jobs cuts. The company decided to reduce its workforce by around 10 per cent (around 16k of the total workforce of 161,000) and said that it will be reducing the production of its major commercial planes including 787 and 777. The company had reported a loss of $641 million in the first quarter of the year 2020 as its airline business got severely impacted due to the coronavirus pandemic. The Chief Executive Officer of the company, David Calhoun had said that business had received a body blow and stated that job cuts could be much more profound to over 15 per cent in commercial aircraft, which had already been in problems and aftermarket services divisions as compared with protection and space systems divisions, where the operations of the company have been more steady.

Let us have a glance at the Airbus SE business and its share price performance

Airbus SE (LON:0KVV) – The company is one of the prominent players in the Aerospace industry. The company manufactures, designs, and delivers advanced solutions to generate a better-connected, safe and developed world. The company is operating in around 180 locations and is connected with 12K direct suppliers all across the globe. The company has final assembly lines of helicopter and aeroplane spread across Americas, Europe as well as Asia, and has attained 6x increase in order book in last twenty years, since the year 2000.

The share price performance of the company – On 14^th May 2020, the stock price of the company was trading at GBX 49.18 at around 09:48 AM GMT on the London Stock Exchange. The stock price of the company decreased by 1.36 per cent as compared to the previous closing price of GBX 49.86.

Airline industry cutting job across the globe amid novel coronavirus epidemic

As per the initial estimates of International Air Transport Association, the revenue losses for the passenger business across the globe could mount to US$63 billion, which is now expected to rise significantly.

It’s not only Airbus, but there are many other companies from the aviation industry, which includes airlines operators and aeroplane manufacture companies, which have already gone for job cuts in their organisation amid novel coronavirus epidemic. Belgium’s Brussels Airlines is the latest, which stated that it would cut one-fourth of its workforce as part of a cost-cutting plan. As per some reports, the company which employs around 4000 people is losing $1.1 million in revenue, i.e. around one million euro every day. The company is also bearing huge leasing and maintenance expenses and was seeking around €300 million of government support.

In March 2020, Delta airline also took an exceptional decision, which included grounding half of the planes and sending 10K staffs on unpaid leave, for reducing the cost of the company during the novel coronavirus crisis. The company stated that it would not operate over 600 aeroplanes and will withdraw the old planes while shutting down most of its Delta Sky Club airport lounges.

During March 2020, the KLM Airlines, the flag carrier of the Netherlands also declared that it would cut 2K jobs during the period of crisis. The company urged its government to support as it wanted to reduce the timing of operating hours of the employees by one-third. It was also reported that the company would cancel training courses as well as cut the bonuses being rewarded to the executives. The company was bound to take this decision as the government imposed full restrictions on flying to the United States, Italy and China.