In line with what we had discussed earlier in ‘The Coronavirus Effect: Airbus and Boeing have much to lose!’, the COVID-19 pandemic has affected the aircraft manufacturers and engine makers as much as, if not more, than airlines and airports. Job cuts in aviation are the latest mounting woes for the industry, which are expected to last into 2021 as the global passenger air travel demand has plummeted by close to 95%. According to a report recently published by GE Aviation, as many as 13000 employees, or 25 percent of GE Aviation’s total workforce, are or will be out of work, by end of this year.
Just last week, Boeing also stated it would cut around 10% of its workforce globally (which corresponds to 16000 Boeing employees), after having slowed aircraft production rates. SpiritAero Systems Holdings also said on May 8, 2020 (Friday), that it shall be cutting 1450 jobs from their base in Kansas.
Currently, ventilators and other health care equipment have seen substantial increase in demand. GE’s much smaller Healthcare division has earned nearly as much as the larger GE Aviation unit during the first quarter of 2020. Accordingly, it seems natural for GE to focus more on current business demand, and give the Healthcare unit a higher priority in terms of financial aid and support.
The job cuts by GE Aviation are a part of the $3bn cash savings which were announced by the company last month. The company had previously issued furloughs that impacted 50% of its U.S. repair, maintenance, and overhaul employees, including those involved in new engine design and manufacturing programmes. The pandemic has hit hard the aircraft manufacturers, which in turn has hit companies like GE Aviation and SpiritAero Systems, that play a crucial role in the supply chain of Airbus and Boeing.
GE Aviation Chief Executive, David Joyce, communicated to the employees:
‘Deep contraction of commercial aviation is unprecedented, affecting every customer worldwide. Global traffic is expected to be down approximately 80% in the second quarter.’
Alongside Boeing, even GE has refused to accept the government support from the $17bn U.S. Treasury fund, which was released for national security related companies. Post the job cuts announcement, GE’s share price was down 4% at $6.23.
The crisis for aircraft manufacturers and their supply chain is expected to last much longer than for airlines, as carriers are unlikely to spend huge amounts on new aircraft until their financial situation soars.
With orders plummeting for Airbus and Boeing, situation looks even tough for aircraft engine makers and other players which support Airbus and Boeing directly or indirectly.