EADS warns of tough two years for industry
By Kevin Done in Paris
Published: June 14 2009 18:40 | Last updated: June 14 2009 18:40
EADS warned on the eve of the Paris air show that the next two years will become increasingly difficult for commercial aircraft makers, as airlines face rising losses and falling traffic.
Louis Gallois, EADS chief executive, said Airbus, the group’s commercial aircraft division, was already aiming to cut its previously planned output levels by 15-20 per cent.
The warning from Europe’s leading aerospace and defence group came as participants came together for the show, the biggest gathering this year of leaders of the global aerospace industry.
Aircraft makers and suppliers have severely reduced staff numbers at the air show in response to the recession and the need to cut costs.
Canada’s Bombardier] said its staff representation had been cut by 40 per cent, while Boeing of the US has 25 per cent fewer staff in Paris.
Some analysts and suppliers believe that both Airbus and Boeing, its US rival, will have to make deeper production cuts than already announced.
Airbus said it was planning to hold “intensive discussions” with a number of key suppliers in Paris this week to convince them its planning was “robust”.
Tom Enders, Airbus chief executive, said: “It is difficult if suppliers make their own forecasts when everyone is tense and nervous. It is very important to stay in the same convoy and to build confidence with suppliers . . . in the [economic] crisis.”
Mr Enders said on the basis of the production cuts already agreed output could eventually fall by 15-25 per cent during 2010 and 2011.
From October Airbus is reducing output of its A320 family of short-haul jets, the mainstay of its production, from 36 to 34 a month after previously announcing plans to raise output to 40 a month from the end of this year.
Output of its A330/A340 long-haul jets has been frozen at 8.5 a month rather than rising to 10-11 a month as previously planned.
Combined deliveries from Airbus and Boeing could still reach a record level this year, partly because Boeing is recovering from last autumn’s eight-week strike, but new orders have collapsed with many airlines facing a second consecutive year of losses.
More and more carriers are seeking to defer and some to cancel deliveries of previously ordered aircraft.
By the end of May Airbus had booked only 11 net new orders, after cancellations, this year, while Boeing had recorded zero net new orders by late May.
Mr Gallois said Airbus was “on track” to deliver about 480 aircraft this year, close to last year’s record number of 483.
But he said “2010 and perhaps 2011 especially will be more critical, our visibility is limited. We will see in 2010 what is the depth of the crisis.”
Airbus was “taking the pulse every day” of its airline customers, said Mr Enders, and had built a system of “watchtowers” to try to assess carriers’ ability to take committed firm orders.
Airbus was willing to provide some financing in “selected cases to those [customers] most important to us,” said Mr Enders. “We are picking the winners of the future.”
The financial system was “still dysfunctional,” he said. “Banks are not performing as they should.”
At least 40 per cent of deliveries by Airbus this year would be covered by financing backed by guarantees from the French, German and UK export credit agencies, he said, approximately double normal levels.
Mr Gallois said EADS was still putting on hold its plans for making substantial acquisitions in the US.
The group’s first priority was preserving its cash resources to safeguard investments in new products, he said.
EADS “could end with very low cash in two years” – down from €8.5bn ($11.9bn) at the end of March – if all the risks facing the group materialised, said Marwan Lahoud, chief marketing and strategy officer.
Ministers from France, Germany, the UK and Spain will meet in Paris on Monday for further talks on the Airbus request for about €3.5bn of funding, possibly in reimbursable launch aid, for the A350, the new family of Airbus long-range jets, due into service in late 2013.
Financing is becoming a crucial issue, and Mr Gallois said 2010 and 2011 would be the peak years for development spending on the €10.5bn, A350 project.
Copyright The Financial Times Limited 2009
By Kevin Done in Paris
Published: June 14 2009 18:40 | Last updated: June 14 2009 18:40
EADS warned on the eve of the Paris air show that the next two years will become increasingly difficult for commercial aircraft makers, as airlines face rising losses and falling traffic.
Louis Gallois, EADS chief executive, said Airbus, the group’s commercial aircraft division, was already aiming to cut its previously planned output levels by 15-20 per cent.
The warning from Europe’s leading aerospace and defence group came as participants came together for the show, the biggest gathering this year of leaders of the global aerospace industry.
Aircraft makers and suppliers have severely reduced staff numbers at the air show in response to the recession and the need to cut costs.
Canada’s Bombardier] said its staff representation had been cut by 40 per cent, while Boeing of the US has 25 per cent fewer staff in Paris.
Some analysts and suppliers believe that both Airbus and Boeing, its US rival, will have to make deeper production cuts than already announced.
Airbus said it was planning to hold “intensive discussions” with a number of key suppliers in Paris this week to convince them its planning was “robust”.
Tom Enders, Airbus chief executive, said: “It is difficult if suppliers make their own forecasts when everyone is tense and nervous. It is very important to stay in the same convoy and to build confidence with suppliers . . . in the [economic] crisis.”
Mr Enders said on the basis of the production cuts already agreed output could eventually fall by 15-25 per cent during 2010 and 2011.
From October Airbus is reducing output of its A320 family of short-haul jets, the mainstay of its production, from 36 to 34 a month after previously announcing plans to raise output to 40 a month from the end of this year.
Output of its A330/A340 long-haul jets has been frozen at 8.5 a month rather than rising to 10-11 a month as previously planned.
Combined deliveries from Airbus and Boeing could still reach a record level this year, partly because Boeing is recovering from last autumn’s eight-week strike, but new orders have collapsed with many airlines facing a second consecutive year of losses.
More and more carriers are seeking to defer and some to cancel deliveries of previously ordered aircraft.
By the end of May Airbus had booked only 11 net new orders, after cancellations, this year, while Boeing had recorded zero net new orders by late May.
Mr Gallois said Airbus was “on track” to deliver about 480 aircraft this year, close to last year’s record number of 483.
But he said “2010 and perhaps 2011 especially will be more critical, our visibility is limited. We will see in 2010 what is the depth of the crisis.”
Airbus was “taking the pulse every day” of its airline customers, said Mr Enders, and had built a system of “watchtowers” to try to assess carriers’ ability to take committed firm orders.
Airbus was willing to provide some financing in “selected cases to those [customers] most important to us,” said Mr Enders. “We are picking the winners of the future.”
The financial system was “still dysfunctional,” he said. “Banks are not performing as they should.”
At least 40 per cent of deliveries by Airbus this year would be covered by financing backed by guarantees from the French, German and UK export credit agencies, he said, approximately double normal levels.
Mr Gallois said EADS was still putting on hold its plans for making substantial acquisitions in the US.
The group’s first priority was preserving its cash resources to safeguard investments in new products, he said.
EADS “could end with very low cash in two years” – down from €8.5bn ($11.9bn) at the end of March – if all the risks facing the group materialised, said Marwan Lahoud, chief marketing and strategy officer.
Ministers from France, Germany, the UK and Spain will meet in Paris on Monday for further talks on the Airbus request for about €3.5bn of funding, possibly in reimbursable launch aid, for the A350, the new family of Airbus long-range jets, due into service in late 2013.
Financing is becoming a crucial issue, and Mr Gallois said 2010 and 2011 would be the peak years for development spending on the €10.5bn, A350 project.
Copyright The Financial Times Limited 2009