[Germany] Trade Association Warns That Airbus Suppliers ‘Face Ruin’

13 MAY 2020

A warning from the head of Germany’s BDLI aerospace trade body says that if Airbus cannot maintain a minimum of half its pre-pandemic output for the next two years a lot of the smaller suppliers in the country could go out of business, Flight Global reports.

This thriving sector has significantly benefited from Airbus’s commercial growth, almost a third of its production is carried out in Germany. However, Volker Thum - managing director of BDLI - says that the coronavirus outbreak has put that success under threat.

“Unless we can guarantee a minimum delivery level for Airbus, a whole industry that has been built over 40 years will collapse. If we don’t get to that minimum level - 50 per cent for widebodies and 60 per cent for narrowbodies - we are finished,” Mr Thum said.

Mr Thum said many Airbus suppliers were shielded from major cash flow problems during the initial weeks of the crisis because the airframer’s terms see paying now for deliveries made at the start of the year. But he cautions that these payments will begin to fall away within 90 days, so there are “only a few weeks left to establish a plan”.

Many companies are also facing immediate bills for raw materials ordered upfront, like carbon fibre resin, titanium and aluminium. To meet the higher demand from Airbus businesses have also been encouraged to make investments in machinery and now carry heavy interest payments on their borrowings, he adds.

Volker Thum worker with Airbus for 25 years before joining BDLI in 2015. He says a key priority for small and medium-sized businesses is to “keep skilled people on the payroll” as orders begin to dry up or it will be difficult for them to ramp-up again when the demand returns.

The blow has been softened by government initiatives to pay around two-thirds of furloughed workers’ salaries and to offer state-guaranteed loans, Mr Thum said.

Since the start of the pandemic, several prominent German companies have announced production cuts. On April 20 engine systems maker MTU began a “gradual restart of operations” after a three-week suspension. Initially, a fifth of its employees went back to work.

MRO provider Lufthansa Technik put 12,000 staff on short-term working on April 7 and will maintain the change until the end of August.