The “Corona” outbreak: German suppliers to Airbus might run out of business, including aluminium firms

The head of German Aerospace Industries Association (BDLI) has sent a warning that many of the country’s SME suppliers could run out of business unless Airbus maintains at least half its pre-crisis output over the next two years.

Volker Thum, Managing Director of BDLI said: “Germany’s aerospace sector has boomed by riding back of Airbus’s commercial growth, with around a third of its production in the country that is now threatened by the coronavirus outbreak.”

He also said: “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% for wide-bodies and 60% for narrow-bodies – we are finished.”

“Many Airbus suppliers have been shielded from major cash flow problems during the initial weeks of the crisis because the air framer’s terms mean it is paying now for deliveries made at the beginning of the year. However, these payments will start to fall away within 90 days, he says, so there are only a few weeks left to establish a plan”.

Thum also added: “Many companies are facing immediate bills for raw materials such as carbon fibre resin, titanium, and aluminium that they have ordered upfront. Businesses have also been encouraged to invest in machinery to meet higher demand from Airbus, and have heavy interest payments on their borrowings.”

Volker Thum has spent 25 years with Airbus before joining BDLI in 2015, says: “A priority for small- and medium-sized enterprises is to keep skilled people on the payroll as orders dry up. Otherwise, it will be difficult for them to ramp-up again when demand comes back.”

Government initiatives to pay around two-thirds of the salary of lay-off workers and to offer state-guaranteed loans have softened the blow.

Several prominent German companies have announced production cuts since the onset of the crisis. Engine systems maker MTU began a “gradual restart of operations” on 20 April after a three-week suspension, initially with just a fifth of employees returning to work.

On 7 April, MRO provider Lufthansa Technik put 12,000 staff on short-term working until the end of August’20.