The world’s biggest aircraft makers, Boeing Co. BA 0.61 % and Airbus Group SE, EADSY 0.90 % are enjoying record order books but, for employees at the companies and their suppliers, the good times are over.
Customers are growing increasingly frugal, making it harder for the two rivals to secure lucrative deals, as appetite wanes for some of their most-profitable planes
Last month, Boeing said it would eliminate 4,000 jobs at its commercial airplane unit and might cut more. Rolls-Royce Holdings RYCEY 4.77 % PLC is shedding 2,600 positions in its aircraft-engine business. General Electric Co. GE 0.21 % this year said it would lay off more than 300 people working on jet engines.
Last week, aluminum giant Alcoa Inc., AA 2.78 % which bet heavily on supplying the aerospace industry, said it had cut 600 jobs at its unit that makes aircraft parts, and planned to chop 400 more. The company might eliminate another 1,000 positions, said Chief Executive Klaus Kleinfeld, after Alcoa lowered its 2016 sales and profit targets for the unit.
Airbus, the No. 2 aircraft maker behind Boeing, also shrank its workforce. Its plane-making unit employed about 78,800 workers at the end of 2013. It ended 2015 with 72,800 people on its payroll, according to company data.
On the face of it, the outlook should be rosy for the more than one million employees involved in producing airliners. Boeing has a backlog of about 5,800 planes. Airbus has deals for over 6,700 airliners it still needs to build.
Both plane makers are cranking up production of their most popular planes to satisfy strong demand from airlines. Combined, they are on track to build more than 1,800 planes a year by 2020, compared with 1,397 in 2015.
At the same time, fierce competition, savvier customers and economic headwinds are adding to the pressure to cut costs. Delta Air Lines Inc. DAL 0.93 % is considering secondhand planes to help it expand its fleet. Willie Walsh, CEO of British Airways parent International Consolidated Airlines Group SA, ICAGY -0.99 % has said the company may rent used long-range jets because new ones are too costly.
Analysts said airlines that splurged on more efficient but costlier planes when fuel prices were high are no longer willing to pay a premium now that oil prices have fallen. That is forcing the aircraft makers to offer discounts to win business.
Ray Conner, the boss of Boeing’s jetliner unit, told employees that “price carries more weight than ever in sales campaigns.” The U.S. company said it would try to avoid involuntary layoffs.
The drive to shrink payrolls comes as Airbus, Boeing and their suppliers are shifting 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 it “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 puts a squeeze on profits as companies try to figure out how to build them as economically as those they have produced for years. Airbus has cut production of the profitable A330 widebody while boosting its output of the new A350 long-range jet, which isn’t expected to 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.Airbus has cut production of the profitable A330 widebody while boosting its output of the new A350 long-range jet, which isn’t expected to 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,” said Alcoa’s Mr. Kleinfeld, leading to lower orders for legacy models. Alcoa cut this year’s target margin for adjusted earnings before interest, taxes, depreciation and amortization for its operation that makes plane parts.
Even so, hiring hasn’t stopped. Airbus said it expects to recruit over 1,000 workers this year, roughly on par with 2015. Around 80% of the new employees will be helping to build more planes.
Robert Wall at firstname.lastname@example.org