Boeing was plunged into a crisis earlier this year, putting the safety of its aircraft under scrutiny. Earlier this month, in a move that shocked the industry, the company pleaded guilty to a criminal fraud charge related to two crashes of its 737 Max jetliner.
That should’ve been good news for Airbus, Europe’s answer to Boeing. However, the company has been dealing with a backlog of orders while juggling supply chain constraints and mounting costs.
Enter COMAC.
The timing of Boeing’s situation has paved the way for Chinese state-backed aircraft maker COMAC to rise as a possible competitor to break the duopoly—even before their flights become widely available.
However, the changing reality of aviation is starting to stress Airbus out, and in response, it’s planning to cut costs and curb hiring.
The French-headquartered company told its staff that the measures, codenamed “LEAD,” would help boost its performance as a planemaker while tackling a growing productivity problem.
The shakeup in headcount will involve eliminating some positions and capping others and won’t look like a “conventional” redundancy plan, Christian Scherer, the CEO of Airbus’s commercial aircraft business, told workers in a memo reported by Reuters last week.
“In view of the continued pressure in the supply chain as well as the overall complex economic situation, there is a need to concentrate our efforts on the fundamentals. Airbus has therefore launched an improvement programme,” an Airbus spokesperson told Fortune on Tuesday. The company will aim to improve its business activities without hurting safety, quality and compliance.
The move comes as Scherer, who’s been in the top role since January, faces a slew of challenges at a time when it could tighten its grip over the aviation market. Last month, the company lowered its yearly jet delivery forecast from 800 to 770 as it faced a shortage in key parts such as engines. Airbus has also had to postpone its goal of producing 75 A320 single-aisle jets monthly by a year.
“Radical change for the better”
These constraints have limited Airbus’s ability to capitalize on its lead. Industry experts have also said the company’s odds of beating Boeing in its moment of weakness are limited despite the appetite for travel.
In its memo to staff, Airbus said that Boeing will come back stronger from its ongoing crisis as it will “radically change for the better.”
COMAC entered the conversation amid Boeing and Airbus’s woes as a player that can shake up the industry as we know it. It sought approval for its C919 plane in 2019—but that was put on hold during the pandemic. European authorities have called the Chinese company “too new” to certify.
Despite being a relatively new player, COMAC has gained traction domestically and is well-padded with government funding, which Airbus acknowledged in its memo. If the company gets its jets green-lit by international authorities, that could increase price competition among the aviation behemoths.
To be sure, Airbus has had some wins, too—American carrier United Airlines signed leases for over 30 Airbus 321neo jets that will replace its Boeing 737 Max 10 orders.
Still, there’s a lot up in the air. The aviation industry is juggling limited aircrafts and booming air travel, with its biggest players left guessing what’s ahead.
On the bright side, Airbus still sees growth in the horizon—even if not immediately—while overhauling its operations to adjust to the new normal.
