Safran Lays Off 3,000 Employees Amid COVID-19 OutbreakBy Alicia Arizpe | Fri, 05/08/2020 - 11:13
Lower demand for new aircraft brought by the global halt of the aviation industry has created trouble for aerospace manufacturers. French engine manufacturer Safran, one of Mexico’s largest aerospace employers, cut down 3,000 jobs amid the COVID-19 pandemic.
Measures to curb the spread of COVID-19 have brought the aviation industry to lows not seen in over a decade. Just during March, the International Air Travel Association (IATA) reported that RPKs fell by 52.9 percent year-on-year and the effect is expected to continue throughout the year. The International Civil Aviation Association (ICAO) estimated that 1.5 billion fewer people would travel internationally during 2020.
Low demand for flights led airlines to ground their fleets and defer or cancel orders for new aircraft, so major aerospace companies were forced to cut their jet production. French giant Airbus cut production by one third and cancelled a new assembly line in Toulouse for the A321neo. Boeing cancelled the construction of a plant in North Charleston and announced that it would reduce production of its 787 to 10 aircraft per month in 2020 and to seven per month in 2021 and of the 777 and 777X to three per month during 2021. These cuts have translated to less demand for suppliers, which are being forced to cut down costs.
Safran reported in March a drop in demand for aircraft interiors retrofitting caused by cash-saving policies from airlines. During the first quarter of 2020, Safran reported a 6.9 percent drop in revenue for a total of €5.4 billion (US$5.91 billion) and warned that the deferred airplane orders would hit its profits throughout the year. "The situation we are facing today is of a different order of magnitude, although it remains difficult, at this point, to measure precisely its far-reaching consequences,” said Philippe Petitcolin, CEO of Safran.
Safran’s cost-savings measures have reached Mexico and the company started to notify employees of the decision to cut personnel in late April. On Thursday, the company told Reuters that it had laid off 3,000 employees. Safran has operated in Mexico for over 25 years and now has numerous manufacturing facilities spread throughout the country, producing critical parts for the CFM56, LEAP and SaM146 engines. The aerospace giant also operates the largest aircraft wiring plant in the world, located in Chihuahua. The company expects that the job cuts taken to this date help preserve Safran’s overall investment in Mexico. “This tough step is proposed in order to preserve the longer-term existence of Safran in Mexico and to protect more than 10,000 jobs still active in the country,” said a spokesperson from Safran.
Mexico’s aerospace industry is currently traversing a turbulent period as local measures meant to contain the spread of COVID-19 have put the industry in a standstill. For that reason, the Mexican Federation of the Aerospace Industry (FEMIA) asked the federal government to classify the industry as essential and allow it to resume operations but no answer has been given so far.