Aircraft makers try to stay afloat amid virus head winds

Airlines have not only idled much of their fleet, but deferred or canceled orders for new aircraft due to the impact of the COVID-19 pandemic on the global civil aviation industry.

Travel restrictions imposed by many countries have wrought havoc on airlines. A dramatic slowdown in both new orders and the evolution of fleet is now foreseen, which is expected to have an adverse impact on aircraft manufacturers, an industry report observed.

The longer such restrictions last, the more airlines will run out of liquidity, leading to bankruptcies, nationalizations or consolidations, and thus causing a potentially irreversible change to the industry landscape and customer structure of aircraft manufacturers, said a report by consultancy Roland Berger.

Any extension of restrictions may cause temporary behavioral changes relating to the pandemic to become permanent, such as the reduction of business travel as a result of increased digital communications, it said.

"Cash-constrained airlines will postpone their scheduled aircraft replacements. It is expected to be a long and slow recovery period after travel restrictions are lifted. As most aircraft are grounded, demand for flight hour and flight cycle-related maintenance has also disappeared," said Manfred Hader, senior partner of Roland Berger in Germany.

In addition, if the oil prices remain as low as they currently are, there is an additional risk of replacement cycles being extended after the initial postponements, and it will add to the woes of aircraft manufacturers, since lower oil prices will not help increase sales of the latest fuel-efficient aircraft models, Hader said.

US aircraft manufacturer Boeing Co, already reeling from the grounding of its B737 Max after two fatal crashes, is posting an increasing number of canceled orders and planning to further lower its production rate. In the first quarter, Boeing suffered a net loss of $641 million. In the same period last year, it achieved a profit of $2.15 billion, according to its earnings report.

The company said it would offer voluntary layoffs to employees to tide over coronavirus fallout. Boeing said in late April that it would cut its 160,000-person workforce by about 10 percent, further reduce 787 Dreamliner production and try to boost liquidity as it prepares for a years-long industry recovery from the pandemic, which would have a lasting impact on the global aircraft manufacturing industry.

"Our industry is going to look very different as a result of this pandemic," Boeing CEO Dave Calhoun told investors. "We will be a smaller company for a while."

After a period of jet production halt earlier, Boeing has slowly resumed aircraft manufacturing at several of its plants in the United States, with enhanced cleaning and physical distancing measures.

Meanwhile in Zhoushan, Zhejiang province in East China, where Boeing built its first overseas completion and delivery center for its single-aisle aircraft, the plant maintains regular production, but the company did not disclose more details about the center.

Boeing's archrival, European aircraft manufacturer Airbus SE, has temporarily shut down some of its aircraft manufacturing plants in Europe, where the pandemic continues to spread. Airbus said it would cut aircraft production rates by about one-third to adapt to the new market environment.

For instance, it plans to cut production rates of its A320 family to 40 per month from a peak of 60 in 2019. It has also started a new aircraft e-delivery process to curb cross infections.

Airbus' Tianjin facility in China, where it owns a completion center for single-aisle A320 and wide-body A330 and A350, has fully resumed regular work, according to the company.

Separately, the aero engine department of General Electric plans to lay off nearly half of its staff, which involves thousands of positions, as falling demand for new aircraft has resulted in declining demand for propulsion systems. Half of its employees in the repair and maintenance department will take a three-month leave with no salaries, the company said.

Brazilian plane-maker Embraer, the world's third-largest aircraft manufacturer, is putting its Brazil-based employees who cannot work remotely on paid leave, the company said.

Besides, Embraer said it is working with companies and research centers on technologies that can increase the availability of equipment to combat coronavirus in Brazil.

The work includes the manufacturing of parts for the ventilator and respirator industry, the development of high-efficiency filtration systems for transforming regular hospital beds into intensive care beds, and studies for the development of portable respirators aimed at rapid implementation and availability.