Airbus reorganizes production to scrutinize costs without redundancies

European aircraft maker Airbus is reorganizing its production to better respond to supply chain disruptions and its main competitors, the American Boeing and the ambitious Chinese Comac. It is doing so under the banner ‘LEAD!’.

The new strategy includes structurally improving performance by simplifying the organization, cost savings, and not hiring new staff, but there would be no layoffs.

Christian Scherer, CEO of Airbus, announced the program’s arrival in July in a letter to the staff, but now the first details of the business optimization program are known.

Fewer planes

“Given the continuing pressure on our supply chain and the complex general economic situation, it seemed necessary to focus our efforts on fundamentals,” Airbus said.

According to French newspaper La Tribune, which reviewed the new LEAD! strategic plan, Airbus is first and foremost revising its delivery target downward. Although it was counting on delivering 800 aircraft this year, a production number close to that before the pandemic, it now plans to deliver only 770.

The main reason is continued difficulties in the supply chain, including shortages of semiconductors and specialized parts such as engine components, cockpit windows, cabin equipment, and landing gear for long-range aircraft.

Many aerospace manufacturers are also struggling to find suitable skilled workers, which is a factor in the aviation industry’s material shortages.

Strategic cost-cutting

These supply chain disruptions couldn’t have come at a worse time: As demand for air travel has increased, Boeing and Airbus are receiving many requests to scale up production of their popular aircraft models, such as the Boeing 737 and the Airbus A320.

However, because of these supply chain constraints, which are also fueled by the rise in the price of raw materials, production rates are failing to increase as planned.

According to La Tribune, the new strategy focuses on strategic cost-cutting to counter rising aircraft costs and to “ramp up our core activities,” which concern “commercial aircraft, integrated functions, subsidiaries,” and the presence in different regions of the world.

That includes discontinuing “non-critical intern projects” precisely because they are no longer part of essential operations. According to union sources, 5,500 non-essential projects have been identified within Airbus Commercial Aircraft after an initial analysis, and this figure could be re-evaluated upward after further investigation.

No layoffs

Airbus also clarifies that LEAD! is not about a social plan. However, it is freezing overall headcount and addressing white-collar positions – rationalizing the management structure – and absenteeism issues in its factories. In the future, though, there would be less reliance on outside employees from service companies.

Travel costs should also be reduced by at least 20% for all positions by the end of the year, while many training courses have also been postponed. All these changes should, in the long run, make it possible to produce more aircraft.

The group, which is owned by the French, German, and Spanish governments, has more than 147,000 employees worldwide. Airbus’ headquarters are in Toulouse.

The final Assembly also takes place in Hamburg, Sevilla, and Tianjin. Parts are also produced in Nazaire, Filton, Broughton, Bremen, Laupheim, Nordenham, Stade, Varel, and Madrid.