Placeholder Image

Subtitles section Play video

  • - [Jaden] This parking lot in California

  • is piling up with empty Boeing and Airbus aircraft,

  • planes that, until recently,

  • were busy flying people to places,

  • and then suddenly people stopped flying.

  • Daily traffic is down some 80% from its peak in 2019.

  • Airlines are fighting for survival

  • as airport activity has fallen to near zero.

  • Meanwhile, industry giants, Boeing and Airbus,

  • have seen order cancellations

  • and furloughed or laid off staff.

  • - I don't believe the industry

  • has ever seen anything like this,

  • and because of that, there's no one you can turn to.

  • We're literally all learning as we go.

  • - [Jaden] Boeing, already weakened by the 737 MAX crisis,

  • saw its stock drop more than 70% in February and March

  • while Airbus' fell about 65% in the same period.

  • The plane makers employ hundreds of thousands of people

  • in several countries,

  • and they're major economic players,

  • often at the center of global politics.

  • - Both those companies are in many ways too big to fail.

  • - [David] Nobody has an interest in retaining

  • government equity in their company.

  • - We can recover from this crisis.

  • - So as the coronavirus pandemic shakes up the industry,

  • we wanted to know,

  • what will it take for Boeing and Airbus

  • to survive this unprecedented crisis,

  • and what does it mean for the future of aviation?

  • - Before coronavirus,

  • Boeing was already struggling to get regulator approval

  • to return its 737 Max to the skies,

  • as the jet was grounded after two deadly accidents

  • linked to a faulty flight control system.

  • In another blow, Boeing recently dropped

  • its 4.2 billion dollar bid to team up

  • with Brazilian jet maker, Embraer,

  • which was supposed to transform the aviation industry,

  • and Airbus had already overtaken Boeing

  • as the world's top plane maker in terms of deliveries.

  • - We think our capacity to compete

  • and be strong on the long term is intact, if not improved.

  • - [Jaden] I wanted to get a better idea

  • of how well-positioned the plane makers are

  • to withstand this crisis

  • so I called Addison Schonland, a partner at AirInsight.

  • - It appears as we sit here right now,

  • there's an advantage to Airbus

  • given its particular tools available to airlines.

  • Boeing is at a disadvantage now

  • because of the MAX grounding

  • and the incompletion of the Boeing/Brazil project.

  • - [Jaden] Now, the coronavirus pandemic

  • has forced the companies to draft survival plans.

  • - We will be suspending all travel

  • from Europe to the United States for the next 30 days.

  • - [Jaden] Air passenger volumes fell more than 90%

  • sending airlines into crisis.

  • In February, major airlines like Delta and United

  • started to cut their losses by canceling some flights.

  • Only weeks later, the collapse in air travel

  • had already trickled down to Boeing and Airbus,

  • with many orders being postponed or canceled.

  • In the first three months of 2020,

  • Boeing saw customers cancel 196 of its aircraft orders.

  • Airbus had 66 cancellations

  • and said almost all of its customers have approached it

  • to discuss deferring or canceling orders.

  • - We're accustomed to bad years like 9/11

  • or the SARS year, Gulf War One,

  • but at the end of the day this is just an unprecedented

  • freezing up of the end user market.

  • - Even in this crisis, both Boeing and Airbus

  • have a key customer they can count on, governments.

  • They're some of the world's biggest defense contractors,

  • with the U.S. Navy even ordering new planes

  • from Boeing amid the pandemic.

  • - The ultimate safe haven right now is defense,

  • particularly U.S. defense programs.

  • - [Jaden] Through their history,

  • Boeing and Airbus have become ingrained

  • in defense, industrial development, and geopolitics.

  • Boeing has worked with the U.S. government

  • to build military planes since World War I,

  • and Airbus' very inception

  • is deeply rooted in European politics,

  • as it was formed as an example of how European countries

  • and companies are stronger when they come together.

  • - Airbus doesn't have a hundred years of history,

  • but if you look at what Airbus consists of,

  • all those European aerospace companies

  • that came together that were also very old,

  • brought with them amazing amount of knowledge.

  • - Boeing and Airbus both spend millions of dollars

  • on lobbying every year.

  • They've criticized each other

  • for getting unfair government subsidies,

  • and they're both massive employers

  • with roughly 161,000 and 134,000 employees respectively,

  • so a major hit to one of their bottom lines

  • means a potential hit to a lot

  • of American and European jobs.

  • When the U.S. government was crafting

  • its two trillion dollar coronavirus stimulus package,

  • a big part of the bailout was focused

  • on the aviation industry.

  • The bill included 17 billion dollars

  • for companies deemed essential to national security,

  • which could potentially include Boeing.

  • Here's the thing, as of early May,

  • some airlines had applied for government aid,

  • but Boeing hadn't,

  • and the idea of Boeing getting bailed out

  • by taxpayer money is sensitive.

  • - You can imagine that those companies,

  • the management is going to fight tooth and nail

  • to prevent the government saying,

  • "Here's 60 billion dollars.

  • "By the way, here's the warrants

  • "and here's the stuff that we're taking.

  • "We own you."

  • - [Jaden] Any loans offered by the government

  • would likely come with strings attached,

  • like limiting stock buybacks, layoffs,

  • and giving the U.S. government a stake in the company,

  • something Boeing CEO suggested he wouldn't be open to.

  • - [David] I don't have a need for an equity stake.

  • If they force it, we just looked at all the other options,

  • and we've got plenty of them.

  • - So what are the options for Boeing and Airbus

  • to keep the cash flowing?

  • In May, Boeing raised 25 billion dollars

  • from private investors and said it didn't expect

  • to need anymore funds, including government aid.

  • But Boeing has already suffered a number of new setbacks.

  • It's now facing civil and criminal scrutiny

  • over the 737 MAX crisis.

  • It suspended its dividend,

  • is offering staff buyout packages,

  • and plans to cut its workforce by 10% this year.

  • - Airbus and the border (mumbles) sector,

  • we emerge from this difficult period eventually.

  • - [Jaden] Airbus also needs to cut spending,

  • but after the pandemic, analysts expect the market

  • for smaller planes to grow

  • because domestic travel is expected to bounce back first,

  • and Airbus can offer its direct competitor to the 737 MAX,

  • its best-selling A320 family.

  • That includes the A321LR, a single-aisle plane

  • that's capable of transatlantic routes.

  • - Boeing really doesn't have a competitor to that jet.

  • - [Jaden] And both companies will likely face

  • a big supply chain issue.

  • Boeing and Airbus rely on a massive network

  • of smaller companies that are struggling to survive.

  • - The million parts that you see flying in close formation

  • that is actually an airplane,

  • all those parts come from all kinds of places

  • around the globe.

  • Some of these places,

  • the companies that make these small parts,

  • are literally family-owned, they're tiny.

  • They don't have the resources

  • if the system is shaken up like this.

  • How do you protect them?

  • - [Jaden] Analysts say it could potentially

  • take several years before the aviation industry recovers,

  • but whenever people will need new planes,

  • they'll likely come from Boeing or Airbus.

  • Not that there are many alternatives.

  • The duopoly makes up about 99%

  • of all large commercial plane orders,

  • with China's state-run plane maker

  • believed to be 10 to 20 years out

  • from becoming a real competitor.

  • - Will the companies be different

  • at the end of this pandemic?

  • Probably, the longer it goes,

  • the more that there will be some kind of structural change,

  • but neither of those companies,

  • based where they are, are dispensable,

  • so I think that whatever happens, we come through this,

  • and they may be different,

  • but they will remain the two top dogs in that industry.

  • (light music)

- [Jaden] This parking lot in California

Subtitles and vocabulary

Operation of videos Adjust the video here to display the subtitles

B1 US WSJ boeing airbus jaden government crisis

Can Boeing and Airbus Survive? | WSJ

  • 9 1
    day posted on 2020/06/11
Video vocabulary