April 27, 2020 / 2:11 PM / a month ago

TEXT-Airbus CEO's 'survival at stake' memo to employees

PARIS, April 27 (Reuters) - Following are extracts from a letter to Airbus’ 135,000 staff from Chief Executive Guillaume Faury warning of the impact of coronavirus, which Faury described as “a global crisis on a scale never before experienced by our generation”.

FUTURE

...many governments are now considering how to lift the lockdowns they have put in place - just as the business sector is looking beyond the immediate crisis to the world of tomorrow.

Unfortunately, the aviation industry will emerge into this new world very much weaker and more vulnerable than we went into it.

PRODUCTION

Our challenge at Airbus is to adapt to this new reality as fast as possible, and limit the scale of the damage. Two weeks ago, we released new production plans for our commercial aircraft business. They reflect the severity of the crisis’s impact on our customers, and the scale of the risks facing Airbus and our suppliers. The production rates for our aircraft are now 30 to 35% below our previous plans. In other words, in just a couple of weeks we have lost roughly one-third of our business. Yes, one third. And, frankly, that’s not even the worst-case scenario we could face. That may sound tough, but I want to be honest with you: there are still many unknowns.

This new planning will remain in place for as long as it takes for us to develop a more thorough assessment of the way ahead. That probably means between two and three months.

So what are we doing in the meantime? We are working closely with all our airline and lessor customers to better understand their individual circumstances and their delivery requirements over the short and medium term. At the same time, we’re assessing the longer term market for new airplanes. We’re collecting all kinds of data to feed forward-looking simulations and models as we try to estimate the shape and speed of the recovery in passenger traffic.

REVENUES

First, revenues: we face a severe and immediate imbalance between our revenues and costs - or more precisely between the cash we have coming in and going out. We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company. That’s why we moved so quickly to secure additional credit lines of some 15 billion Euros. They give us the flexibility and time to adapt and resize our business. But we must now act urgently to reduce our cash-out, restore our financial balance and, ultimately, to regain control of our destiny.

SUPPLY CHAINS

Second, on our industrial workload we face difficulties on several fronts. Lockdowns and travel bans have not only curtailed our business activities, but thrown our internal and external supply chains out of synch. More seriously, many airlines around the world are fighting for their survival, undermining their ability to take delivery of our aircraft in the short term and for the foreseeable future.

JOBS

To improve our flexibility as a workforce, we are deploying all the HR measures that are available within Airbus, for example asking employees in some countries to take up to ten days off by the middle of May. Having exhausted these options, we’ve now begun to make use of new partial unemployment government schemes in various countries which help businesses adjust their workforces, while supporting the incomes of employees affected by changes. We’ve achieved this in coordination with our social partners, and I thank them for having responded promptly.

But we may now need to plan for more far-reaching measures. That’s because of the sheer magnitude of this crisis and its likely duration. Remember: we’ve lost a third of our business almost overnight and we need to cut costs throughout the company. We’re living through one of the largest economic shocks in history, so must consider all options. I am being straight and transparent with you, because I want to prepare you for the reality of our new operating environment. The survival of Airbus is in question if we don’t act now. It’s on us to find a way through this crisis and emerge from it, wounded but alive, and ready again to deliver on our purpose of pioneering sustainable aerospace. I hope that you understand.

LONG-TERM RESPONSE

In taking these decisions, one factor will be critical: the shape and duration of this slump, for the aerospace sector as a whole and for OEMs like Airbus. Will it be a short and deep crisis with a fast recovery? Or will it be longer and more painful, with previous levels of demand only returning after five or ten years?

It’s the answers to these questions that will determine our longer-term response to this crisis. But it’s still too early to provide those answers. So we want to take the time now to improve our understanding, so that we can prepare the right measures for the future when we have the best possible information. (Reporting by Johanna Decorse, Tim Hepher)

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