The aviation industry took another hammering from the coronavirus crisis on Monday as GE cut 10,000 aerospace jobs and airline stocks fell on Warren Buffett’s weekend comments about the sale of his holdings in the sector.
The new permanent lay-offs at GE Aviation come on top of 2,600 cuts to its US headcount last month and are expected to hit a quarter of a 52,000-strong workforce that stretches from Ohio to Europe over the coming months.
The worldwide economic shutdown has been devastating for the aviation industry, with carriers warning it could take years for the sector to recover and aircraft and engine manufacturers scrambling to slash capacity.
US Treasury secretary Steven Mnuchin said it was “too hard to tell” if the US would relax restrictions on international travel to Asia and Europe this year. President Donald Trump was looking for “ways to stimulate travel”, Mr Mnuchin said, but he suggested this effort would initially be limited to travel within the US.
To protect our business, we have responded with difficult cost-cutting actions over the past two months. Unfortunately, more is required
Asked on Fox Business if international travel would reopen this year, Mr Mnuchin said: “Too hard to tell at this point. I hope down the road it is...our priority is opening up the domestic economy.”
He added: “Obviously, for business people that do need to travel, there will be travel on a limited basis. But this is a great time for people to explore America.”
Demand slump
The aerospace industry is facing a severe drop in demand after more than a decade of booming orders. Airbus and Boeing have cut production by 35 per cent and 50 per cent, respectively. Rolls-Royce, the UK engine maker, is preparing to cut 8,000 jobs and 12,000 will go at British Airways.
“To protect our business, we have responded with difficult cost-cutting actions over the past two months. Unfortunately, more is required as we scale the business to the realities of our commercial market,” David Joyce, chief executive of GE Aviation, wrote in a statement to employees.
The cuts in a business that makes engines, components and integrated systems for commercial, military and business aircraft were “the required response to the continued contraction of the industry and its protracted recovery”, Mr Joyce said.
Shares in Delta Air Lines, United, American Airlines and Southwest all tumbled in pre-market trading after Mr Buffett said his Berkshire Hathaway group had exited all four carriers last month. The investment vehicle sold more than $6 billion (€5.5 billion) in stock related to airline trade.
“It turns out I was wrong,” Mr Buffett said during Berkshire Hathaway’s annual investor meeting at the weekend. “The airline business - and I may be wrong and I hope I’m wrong - I think it has changed in a very major way.” - Copyright The Financial Times Limited 2020
