Plane Makers' Employees Buffeted Despite Booming Orders
19 April 2016 - 10:14PM
Dow Jones News
By Robert Wall
LONDON--The world's biggest airliner makers Boeing Co. and
Airbus Group SE are enjoying record order books but, for employees
at the companies and their suppliers, the good times are over.
Boeing last month said it would eliminate 4,000 jobs at its
commercial airplane unit and may cut more. Rolls-Royce Holdings PLC
is shedding 2,600 positions in its aircraft engine business.
General Electric Co. this year said it would lay off more than 300
people working on jet engines.
Aluminum producer Alcoa Inc., which has bet heavily on supplying
the aerospace industry, last week said it had cut 600 jobs in the
unit that makes aircraft parts, with plans to shed 400 more.
Another 1,000 positions may be eliminated, Chief Executive Klaus
Kleinfeld said after the company lowered its 2016 sales and
profitability targets for the unit.
Airbus, the No. 2 plane maker behind Boeing, also reduced
headcount. The plane making unit employed about 78,800 workers at
the end of 2013. It ended last year with 72,800 people on its
payroll, according to Airbus data.
On the face of it, job security for the more than 1 million
employees involved in producing airliners should be rosy. Boeing
has a backlog of about 5,800 planes yet to be delivered. Airbus has
deals for more than 6,700 airliners it still needs to build.
Both plane makers are increasing output of their most popular
planes to satisfy strong airline demand. They are on track to build
more than a combined 1,800 planes a year by 2020 compared with
1,397 in 2015.
But cost-cutting pressure is mounting. Fierce competition, more
discerning buyers and economic headwinds are making it harder for
Airbus and Boeing to secure lucrative deals.
Delta Air Lines Inc. is looking at secondhand planes to meet
some of its fleet growth needs. Willie Walsh, CEO of British
Airways parent International Consolidated Airlines Group SA, has
said the company may rent used long-range jets because new ones are
too costly.
Airlines that splashed out on more efficient but expensive
planes when fuel costs were high are no longer willing to pay a
premium at lower oil prices, analysts said. That is forcing the
plane makers to offer discounts to win deals.
Boeing's jetliner unit boss, Ray Conner, told employees recently
that the focus on cutting costs comes as "price carries more weight
than ever in sales campaigns." The company said it would try to
avoid involuntary layoffs.
The drive to shrink payroll comes as Airbus, Boeing and their
suppliers shift from years of designing and developing the newest
planes to building them efficiently.
With development of many of its new aircraft engines completed,
GE said "the company will be unable to maintain its level of 4,352
engineers in the U.S." GE plans to cut 307 jobs after offering
voluntary early retirement to some engineers and shifting others
into new jobs.
An Airbus spokeswoman said that "over the last few years we
required an exceptionally high engineering workforce level due to
several, overlapping new aircraft developments. With the bulk of
the work for these major new aircraft developments behind us, we
are coming back in the next few years to a regular level of
engineering workload."
Building new planes also puts a squeeze on profits as companies
try to figure out how to build them as economically as the ones
that have been in production for years. Airbus has cut output on
the profitable A330 widebody while boosting production of the new
A350 long-range jet, which won't make money for a few years. Boeing
is building fewer 777 long-range jets ahead of the introduction of
an improved version around the end of the decade.
"The market is going through a transition given an unprecedented
level of new model introductions," Alcoa's Mr. Kleinfeld said,
leading to lower orders for legacy models. Alcoa cut this year's
target margin for adjusted earnings before interest, taxes,
depreciation and amortization for the unit that makes plane
parts.
Hiring hasn't ended, though. Airbus, for instance, said it
expects to recruit more than 1,000 staff this year, roughly on par
with 2015's intake. Around 80% will be workers to help build more
planes.
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
April 19, 2016 07:59 ET (11:59 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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