SYDNEY/MONTREAL (Reuters) – The pandemic is taking its toll on aerospace manufacturing, as Boeing Co (N:) announced it would halt production of most widebody jets and Airbus SE (PA:) restarted only partial output after a four-day shutdown as suppliers cut jobs.
With airlines unable to fly because of a collapse of demand over fears of contagion, reinforced by air travel restrictions, planemakers and their suppliers are under pressure to save cash to ride out a squeeze on liquidity.
Moody’s cut its outlook for the aerospace and defense industry to negative from stable and warned that even when markets recover, the damaged balance sheets of most airlines would hurt demand for new aircraft.
Global passenger capacity fell by 35% last week, the worst since the start of the crisis, according to data from airline schedules firm OAG, which said deeper cuts were likely in the coming weeks.
More than 2,500 planes have already been grounded this year, data from Cirium shows, with taxiways, maintenance hangars and even runways at major global airports turning into giant parking lots.
Large U.S. carriers have drafted plans for a possible halt in U.S. passenger air traffic, four officials said on condition of anonymity, though there is no plan in place and U.S. President Donald Trump said on Monday he was not considering a domestic travel ban.
Boeing faces the shutdown of key assembly lines for the second time in a year after being forced to halt production of its grounded 737 MAX aircraft in January.
Production of long-haul jets like the 787 and 777 in Washington state will pause for 14 days starting Wednesday, forcing the world’s largest industrial building, the giant Boeing wide-body plant at Everett north of Seattle, to fall silent for the first time in recent memory.
As the crisis deepens, U.S. lawmakers are considering changing some of about $58 billion in proposed emergency loans to the airline industry to cash grants to cover payroll costs, four people familiar with the matter said.
Democratic U.S. lawmakers late on Monday proposed giving struggling U.S. airlines and contractors $40 billion in cash grants that would not be paid back and would require significant new environmental, labor and other conditions.
Brazil’s Embraer SA (SA:), the world’s third-largest aircraft maker, said on Sunday it would furlough all non-essential workers in Brazil where it makes regional jets and further measures could be announced later this week.
Joining the list of temporary shutdowns is Bombardier, which is suspending Canadian production of business jets, according to a source familiar with the matter.
Airbus chief executive Guillaume Faury had called for strong government support for airlines and suppliers but stopped short of calling for direct aid for Airbus itself, which has secured an extra 15 billion euros ($16.14 billion) of commercial credit lines.
The European planemaker has, however, told officials privately that it may need European government help if the crisis lasts for several months, Reuters reported last week.
Industry executives said the biggest source of alarm was the global supply chain of thousands of suppliers who would be severely hurt by abrupt stop-start movements in plane output. Many are already severely stressed by the year-long 737 MAX grounding.
The International Association of Machinists and Aerospace Workers on Monday said in a letter to Congress that more than 500,000 U.S. aerospace production jobs could be in jeopardy and called for a relief package that included provisions to protect against layoffs.
Engine maker GE Aviation (N:) announced plans to cut its U.S. workforce by around 10%, according to a letter to staff.
GE’s aviation unit employed about 52,000 people globally as of 2019, with about half of them working in the United States.
Montreal-based training specialist CAE Inc (TO:) has temporarily closed three commercial aviation training centers and is laying off 465 manufacturing workers and slashing executive salaries and capital spending to contain costs.
German aircraft engine maker MTU Aero Engines (DE:) said it would shut output in some European plants for three weeks.
The shutdowns are designed in part to allow for deep cleaning and the re-organisation of factory workers, who must stand further apart and avoid working in clusters, slowing output.
But analysts expressed doubts over the strength of future demand as the industry recovers from its worst crisis.
A global recession combined with the possibility that corporate travel does not recover could hamper a full recovery, said Martin Hallmark, a senior vice president at Moody’s Investors Service.
The ratings agency expects airline passenger volumes to fall by 25% to 35% this year.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
