Virus shockwave rocks airplane-makers, suppliers

SYDNEY/MONTREAL: The coronavirus pandemic is taking its toll on aerospace manufacturing, with Boeing Co saying it would halt production of most wide-body jets and Airbus restarting only partial output after a four-day shutdown as suppliers cut jobs.

With airlines unable to fly because of a collapse of demand over fears of contagion, reinforced by air travel restrictions, plane-makers and their suppliers are under pressure to save cash to ride out a squeeze in liquidity.

Moody’s cut its outlook for the aerospace and defence industry to negative from stable and warned that even when markets recover, the damaged balance sheets of most airlines would hurt demand for new aircraft.

Global passenger capacity fell 35% last week, the worst since the start of the crisis, according to data from airline schedules firm OAG, which said deeper cuts were likely in the coming weeks.

More than 2,500 planes have already been grounded this year, data from Cirium shows, with taxiways, maintenance hangars and even runways at major global airports turning into giant parking lots.

On Tuesday, Asian jet fuel refining margins – the difference in value between raw crude and the refined product – turned negative for the first time in over a decade, suggesting there was no recovery timeframe in sight for the aviation industry.

Large US carriers have drafted plans for a possible halt in US passenger air traffic, four officials said on condition of anonymity, though there is no plan in place and US President Donald Trump said on Monday he was not considering a domestic travel ban.

Boeing faces the shutdown of key assembly lines for the second time in a year after being forced to halt production of its grounded 737 MAX aircraft in January.

Production of long-haul jets like the 787 and 777 in Washington state will pause for 14 days starting Wednesday, forcing the world’s largest industrial building, the giant Boeing wide-body plant at Everett north of Seattle, to fall silent for the first time in recent memory.

As the crisis deepens, US lawmakers are considering changing some of about $58 billion in proposed emergency loans to the airline industry to cash grants to cover payroll costs, four people familiar with the matter said.

Brazil’s Embraer SA, the world’s third-largest aircraft-maker, said on Sunday it would furlough all non-essential workers in Brazil where it makes regional jets, and further measures could be announced later this week.

Joining the list of temporary shutdowns is Bombardier, which is suspending Canadian production of business jets, according to a source familiar with the matter.

Airbus had called for strong government support for airlines and suppliers but stopped short of calling for direct aid for the company, which has secured an extra €15 billion ($16.14 billion) of commercial credit lines.