Covid Impact: Aviation Industry Workers Undergoing Massive Job Losses

Summary

• Well-known companies are cutting jobs to reduce their costs
• Airbus has planned to cut 15,000 jobs from all over the world, including 1,700 from the United Kingdom
• France, Germany, Spain and the United Kingdom would be the significant countries suffering from this decision

People are losing their jobs in the face of Covid-19 pandemic, which will further hurt the United Kingdom's GDP in the current financial year and consumption will also slowdown in the wake of lower disposable income with the consumers. Various companies are regularly announcing job cuts as they are losing revenue streams. Prominent companies such as Rolls-Royce, Centrica, BP, Bentley, Virgin Atlantic, Raynair, British Airways, Johnson Matthey, Clarks, etc., are planning to layoff a major chunk of their workforce.

The pandemic has disrupted the operations of the Aviation Industry. It has been one of the important sectors of the United Kingdom economy, contributing £92 billion to the Gross Domestic Product (GDP) in the year 2019. The current crisis has led to sluggish demands from the customers.

The airline industry has been under the pump due to the pandemic taking over the world by surprise. The airline companies have reduced flight hours, grounded their fleet, laid-off people as the travel restrictions were imposed by the governments. It is already in deep trouble.

Airbus Job-cuts

On 30 June 2020, Airbus announced that it plans to cut 15,000 jobs including 1,700 of them in the United Kingdom. The company employs 135,000 workers, of which, 15 percent will be losing their jobs. Drop in the aircraft business activity by almost 40 percent, has led the company to take such drastic steps.

Workers operating in France, Germany, Spain and the UK (Broughton, North Wales) will mainly be affected by these job cuts. Airbus comprises of a total 14,000 workforce in the United Kingdom. 6,000 employees were hired before the Covid-19 crisis for the Welsh operations, which are likely to bear the job losses.

Airbus plans redundancies of 5,100, 5,000 and 900 of its employees in Germany, France and Spain and also 1,300 from the rest of the world, Germany being highly affected by this decision.

The Chief Executive of Airbus, Guillaume Faury, said that their company has been undergoing the "gravest crisis" which the industry has ever faced. He also added that adequate measures have initially been taken to absorb the shock of the pandemic. It's time for the company to move forward and think about this challenging situation as a leader of the aerospace industry.

In April 2020, Airbus announced that the production of its commercial aircraft would be cut by one-third, and the company started to make only 40 of its bestselling A320 planes a month. Before the crisis, it used to produce more than 60 of such aircraft every month.

Grounding 737 Max planes, Boeing, in line with its competitor, Airbus, announced about 16,000 jobs cuts after the decrease in the functioning level of the aircraft due to the pandemic. The company suffered an operating loss of $1.7 billion during the first three months of the crisis, leading to job losses.

Job losses throughout the Aviation Industry

Due to shutdown of the aviation activities and outbreak of the novel coronavirus, the British aviation sector is likely to incur huge losses. As per the report of the International Air Transport Association (IATA), the sector is likely to witness a dive in the revenue of 55 percent 2020 in comparison to 2019. In addition to this, the IATA expects that the devastating virus would further lead to 32 million job losses.

The airline carriers are likely to incur £84.3 billion net losses during 2020. The airline industry is going through a rugged phase. The airline carriers are desperately in need of fiscal and regulatory support from the governments. IATA also called upon amending of refund rules to ensure the liquidity of the system. It has proposed to offer cash vouchers earlier, instead of refunding cash for flight cancellations.

With the airline industry restarting gradually, mostly within domestic markets and to low-risk neighbouring countries initially, but the situation is expected to recover in the second half of the year 2020. However, there is uncertainty regarding consumer behaviour in terms of confidence level, the extent of travel demand and how the industry operates in the restart phase.

There are approximately 960 new commercial airlines that have been lined up for delivery this year, but it is 40 percent lower than what was expected at the beginning of the year. Only 235 new aircrafts have been delivered in May 2020.

About Airbus SE

Belonging to the aerospace and defence industry, Airbus operates in three segments - Airbus, Airbus Helicopters and Airbus Defence and Space. The company focuses on manufacturing, marketing and selling of commercial jet aircraft, aircraft components, civil and military helicopters, etc.

Airbus SE (LON:0KVV) stock traded at EUR 64.84 on 1 July 2020, at 2:46 PM, up by 1.95 percent from its previous close. The volume of the stock traded at the time of reporting was 275,097.

About Boeing CO

Serving customers from across 150 countries, Boeing is the world's largest aerospace company. It is a manufacturer of commercial jetliners, defence, space and security systems, and service provider of aftermarket support.

Boeing CO (LON:BOE) stock traded at USD 180.40 on 1 July 2020, at 2:50 PM, down by 1.36 percent from its previous close of USD 182.89. It had a market capitalisation (Mcap) of £83,529.83 million. The volume traded at the time of reporting was 47,125. The company recorded a negative return on the price of 44.69 per cent on a YTD (Year to Date) basis.

The airline sector is likely to see several changes in procedures after the Covid-19 pandemic. Some of the airlines have introduced social distancing in the flights in terms of the seating arrangement, for example, EasyJet. Besides, the airport authorities might see a huge increase in capital expenditure to adopt all the protective measures guided by the Government. In order to reduce the cost, the companies are choosing job-cuts as one of the actions.