As air travel is not expected to recover until 2023, and airlines remain under stress, the production plans of aircraft manufacturers are also getting severely affected.
Production Cuts by Airbus and Boeing
In May this year, Boeing had slashed its workforce by 12,000 due to the pandemic outbreak. Being one of the largest aircraft manufacturers, the company laid off 6770 workers, and another 5520 employees took buyout offers and left on their own. The total employee strength of Boeing was around 160,000 before the layoffs.
In July, Airbus Industries announced that it would shed 15,000 jobs worldwide. This would be done in a phased manner over a period of one year. Airbus Employee Unions have since been resisting such a move.
The airlines are either renegotiating delivery schedules of new aircraft or in some cases cancelling the order. The situation remains extremely volatile.
Boeing was already saddled with the issues related to B737MAX. This year, a total of 373 orders of the MAX have been cancelled so far. According to Bank of America, about 2,480 deliveries of the Max have been postponed by at least a year.
Boeing’s order book in June shows that the company has received orders for 59 new aircraft. The most significant order was for 12 Dreamliners placed by All Nippon Airways in February. The 18 new orders in the B737 category are for the B737NG model. Apart from the MAX cancellations, four orders of B787 were also cancelled. Boeing has not named the customer but it is most likely that of Avianca of Columbia, which recently filed for bankruptcy.
According to Defense Security Monitor –
“By the end of June 2020, Boeing’s backlog (total unfilled orders before ASC 606 adjustment) was 5,232 aircraft, of which 4,221, or 81 percent, were 737 NG/MAX narrow-body jets.”
(Note: The ASC 606 Changes pertains to Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) new revenue realization methodology. This adjustment in books may not imply the order has been cancelled.)
Read more in Travel Radar’s article regarding Boeing slashing production.
The effect of the pandemic on Airbus production is equally disastrous. Sixty-seven aircraft orders have been cancelled. Airbus fears other customers may also renegotiate deliveries. As a precautionary measure, the company has cut down production. The A320 production has been reduced to forty aircraft per month, down from last year’s average of fifty-three aircraft per month. The A330 and A350 production is reduced to two and six aircraft per month, respectively.
Airbus backlog of aircraft as of June 30 stood at 7584. The breakup is as follows: 526-A220s, 6168-A320s family, 321-A330s, 560-A350 XWBs and nine A380s. Close to 90 per cent orders in the A320 and A330 category are for the respective ‘neo’ models.
Read Travel Radar’s article about fall in Airbus Revenues in the first half of this year.
Both Boeing and Airbus expect that the backlog will further significantly shrink in the coming months. As financial troubles for the Airlines gather momentum, the new purchases are likely to put on hold.
What is your opinion about the aircraft order backlogs? Do you believe the airlines will cancel old orders? Do write to us in the comments section below!