Manufacturers and contractors are cutting back as economic slowdown bites and aircraft orders are cancelled

The number of job losses in the North American aerospace industry since 11 September now exceeds 60,000 and is expected to grow as suppliers begin to feel the effects of cutbacks by major airframe and powerplant contractors.

General Electric is the latest to make cuts with the announcement that the Aircraft Engines division would be shedding 4,000 employees by early next year, representing 13% of its worldwide workforce. The company is anticipating as much as a 20% reduction in civil engine deliveries over the next 12 months, along with a 10-15% drop in spares and overhaul activity.

GE president David Calhoun cautioned employees that while the company expected work on the Boeing sonic cruiser to proceed, development could be at a lower level. He added that while Airbus has indicated that the development of the A380 remains on schedule, there were elements of the GP7000 engine being developed jointly with Pratt & Whitney that could be pushed back.

The impact of the 11 September attacks is already being felt among the aircraft manufacturers with Boeing delivering 19 fewer aircraft in the third quarter than projected. The company delivered of 120 aircraft in the period, of which 29 were after the attack. It has already said it plans to cut up to 30,000 staff. US analysts Forecast International say the Boeing cuts were "almost certainly in place prior to 11 September".

Boeing has long boasted that for every one job, it supports another three in the wider economy. "If you put that equation on the negative side, a 20,000-30,000 job cut at Boeing resulting in 60,000-90,000 layoffs elsewhere is not an unreasonable number," suggests an analyst. The Aerospace Industries Association is projecting $5.5 billion in lost business in 2002 and another $6.7 billion in 2003.

Small aircraft manufacturers are also having to cut back, with Raytheon's troubled aircraft business chopping another 750 workers, increasing total redundancies to 1,700 since the start of the year. Embraer has announced it will trim its 13,000 workforce by 1,800 as the result of an anticipated $1.9 billion fall in revenue caused by reduced deliveries.

While it claims no aircraft orders have yet been cancelled, planned deliveries for the year have been reduced from 185 to 160 and are expected to fall as low as 135 in 2002. In the longer term the company its having to reassess the rate of ERJ-170 production planned for 2003 as the result of the financial woes of launch customer Crossair.

Regional rival Bombardier is attempting to arrange about $200 million in financing for some of its clients in an effort to save over $1 billion in orders. Boeing is attempting something similar for some of its airline customers.

Bombardier's biggest concern is orders for 150 CRJ200 regional jets from US airlines due for delivery by mid-2002. Two-thirds of the orders are fully secured, leaving 50 unidentified aircraft in doubt.

The $200 million represents about 20% of equity or debt financing airlines must come up with themselves for those 50 aircraft. Bombardier estimates 15 of the orders are at risk, although it will not increase its lending to any airlines. While no orders have been cancelled, some deliveries have been delayed by a few weeks.

Source: Flight International