SE agreed to revive orders for close to 75 aircraft from Qatar Airways after reaching a settlement with the Middle East airline over a long-running dispute about chipping paint on its A350 wide-body models.
A spokesman for Airbus said it would now go ahead with delivering 50 A321 narrow-bodies and 23 remaining A350 twin-aisles previously ordered by Qatar.
The orders had been scrapped as part of an escalating, multibillion-dollar legal battle over the paint issue, which the airline had claimed could pose a safety concern. Airbus repeatedly denied the claims.
Airbus and Qatar Airways earlier Wednesday said in a joint statement that they had reached an “amicable and mutually agreeable settlement” in relation to the legal dispute. The companies didn’t disclose the details of the settlement other than to say the agreement didn’t amount to an admission of liability from either party. A program to repair the degradation on Qatar’s current fleet is under way, the companies added.
Qatar Airways had previously grounded 29 of its A350 jets and refused new deliveries over the issue, reducing its capacity amid a surge in travel to Doha for the 2022 FIFA World Cup. The airline has said the peeling paint was exposing the meshed copper foil that is designed to protect the aircraft from lightning strikes.
That led Qatar Airways to initiate legal proceedings against Airbus in London, in which the carrier had sought damages partly based on the impact on its operations from not being able to use the aircraft. A possible trial had been scheduled for later this year.
While the paint issue has also affected other A350s in service at other Airbus customers, only Qatar Airways had taken the step to unilaterally ground the aircraft. Airbus and the European Union Aviation Safety Agency, which oversees the Toulouse, France-based plane maker, have insisted that the issue is only cosmetic.
The situation had led to a broad fallout between Airbus and one of its biggest customers. In August, Airbus ended all new business with Qatar Airways, canceling contracts valued at more than $13 billion according to the latest available list prices and before the hefty discounts plane makers typically give to customers.
After Airbus canceled a deal to sell Qatar Airways 50 of its A321 jets, the Gulf carrier ordered up to 50 of rival
Boeing Co.
’s 737 MAX 10 single-aisle jets within two weeks. Qatar Airways had previously canceled most of an existing MAX order in 2020 after receiving five of the planes.
Airbus lawyers alleged that Qatar Airways had exaggerated concerns about the issue in an attempt to claim compensation and refuse delivery of aircraft that it didn’t need as the pandemic hit demand for air travel. The plane maker complained in court that the airline and its regulator, the Qatar Civil Aviation Authority, had failed to provide documentation that showed the technical justifications behind grounding the aircraft.
Qatar Airways has said it provided images of the damage, which it purported showed the scale of the issue and the potential safety risk.
Qatar Airways Chief Executive
Akbar Al Baker
has long had a reputation as a tough customer, publicly lashing out at both Airbus and Boeing when he perceives delivery or quality issues.
The headline-grabbing expansion of layoffs beyond high-growth technology companies stands in contrast to historically low levels of jobless claims and news that companies such as
Chipotle Mexican Grill Inc.
and
Airbus SE
are adding jobs.
This week, four companies trimmed more than 10,000 jobs, just a fraction of their total workforces. Still, the decisions mark a shift in sentiment inside executive suites, where many leaders have been holding on to workers after struggling to hire and retain them in recent years when the pandemic disrupted workplaces.
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Unlike
Microsoft Corp.
and Google parent
Alphabet Inc.,
which announced larger layoffs this month, these companies haven’t expanded their workforces dramatically during the pandemic. Instead, the leaders of these global giants said they were shrinking to adjust to slowing growth, or responding to weaker demand for their products.
“We are taking these actions to further optimize our cost structure,”
Jim Fitterling,
Dow’s chief executive, said in announcing the cuts, noting the company was navigating “macro uncertainties and challenging energy markets, particularly in Europe.”
The U.S. labor market broadly remains strong but has gradually lost steam in recent months. Employers added 223,000 jobs in December, the smallest gain in two years. The Labor Department will release January employment data next week.
Economists from Capital Economics estimate a further slowdown to an increase of 150,000 jobs in January, which would push job growth below its 2019 monthly average, the year before pandemic began.
There is “mounting evidence of weakness below the surface,”
Andrew Hunter,
senior U.S. economist at Capital Economics wrote in a note to clients Thursday.
Last month, the unemployment rate was 3.5%, matching multidecade lows. Wage growth remained strong, but had cooled from earlier in 2022. The Federal Reserve, which has been raising interest rates to combat high inflation, is looking for signs of slower wage growth and easing demand for workers.
Many CEOs say companies are beginning to scrutinize hiring more closely.
Slower hiring has already lengthened the time it takes Americans to land a new job. In December, 826,000 unemployed workers had been out of a job for about 3½ to 6 months, up from 526,000 in April 2022, according to the Labor Department.
“Employers are hovering with their feet above the brake. They’re more cautious. They’re more precise in their hiring,” said
Jonas Prising,
chief executive of
ManpowerGroup Inc.,
a provider of temporary workers. “But they’ve not stopped hiring.”
Additional signs of a cooling economy emerged on Thursday when the Commerce Department said U.S. gross domestic product growth slowed to a 2.9% annual rate in the fourth quarter, down from a 3.2% annual rate in the third quarter.
Not all companies are in layoff mode.
Walmart Inc.,
the country’s biggest private employer, said this week it was raising its starting wages for hourly U.S. workers to $14 from $12, amid a still tight job market for front line workers. Chipotle Mexican Grill Inc. said Thursday it plans to hire 15,000 new employees to work in its restaurants, while plane maker Airbus SE said it is recruiting over 13,000 new staffers this year. Airbus said 9,000 of the new jobs would be based in Europe with the rest spread among the U.S., China and elsewhere.
General Electric Co.
, which slashed thousands of aerospace workers in 2020 and is currently laying off 2,000 workers from its wind turbine business, is hiring in other areas. “If you know any welders or machinists, send them my way,” Chief Executive
Larry Culp
said this week.
Annette Clayton,
CEO of North American operations at
Schneider Electric SE,
a Europe-headquartered energy-management and automation company, said the U.S. needs far more electricians to install electric-vehicle chargers and perform other tasks. “The shortage of electricians is very, very important for us,” she said.
Railroad CSX Corp. told investors on Wednesday that after sustained effort, it had reached its goal of about 7,000 train and engine employees around the beginning of the year, but plans to hire several hundred more people in those roles to serve as a cushion and to accommodate attrition that remains higher than the company would like.
Freeport-McMoRan Inc.
executives said Wednesday they expect U.S. labor shortages to continue to crimp production at the mining giant. The company has about 1,300 job openings in a U.S. workforce of about 10,000 to 12,000, and many of its domestic workers are new and need training and experience to match prior expertise, President
Kathleen Quirk
told analysts.
“We could have in 2022 produced more if we were fully staffed, and I believe that is the case again this year,” Ms. Quirk said.
The latest layoffs are modest relative to the size of these companies. For example, IBM’s plan to eliminate about 3,900 roles would amount to a 1.4% reduction in its head count of 280,000, according to its latest annual report.
As interest rates rise and companies tighten their belts, white-collar workers have taken the brunt of layoffs and job cuts, breaking with the usual pattern leading into a downturn. WSJ explains why many professionals are getting the pink slip first. Illustration: Adele Morgan
The planned 3,000 job cuts at SAP affect about 2.5% of the business-software maker’s global workforce. Finance chief
Luka Mucic
said the job cuts would be spread across the company’s geographic footprint, with most of them happening outside its home base in Germany. “The purpose is to further focus on strategic growth areas,” Mr. Mucic said. The company employed around 111,015 people on average last year.
Chemicals giant Dow said on Thursday it was trimming about 2,000 employees. The Midland, Mich., company said it currently employs about 37,800 people. Executives said they were targeting $1 billion in cost cuts this year and shutting down some assets to align spending with the macroeconomic environment.
Manufacturer
3M Co.
, which had about 95,000 employees at the end of 2021, cited weakening consumer demand when it announced this week plans to eliminate 2,500 manufacturing jobs. The maker of Scotch tape, Post-it Notes and thousands of other industrial and consumer products said it expects lower sales and profit in 2023.
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“We’re looking at everything that we do as we manage through the challenges that we’re facing in the end markets,” 3M Chief Executive
Mike Roman
said during an earnings conference call. “We expect the demand trends we saw in December to extend through the first half of 2023.”
Hasbro Inc.
on Thursday said it would eliminate 15% of its workforce, or about 1,000 jobs, after the toy maker’s consumer-products business underperformed in the fourth quarter.
Some companies still hiring now say the job cuts across the economy are making it easier to find qualified candidates. “We’ve got the pick of the litter,” said
Bill McDermott,
CEO of business-software provider
ServiceNow Inc.
“We have so many applicants.”
At
Honeywell International Inc.,
CEO
Darius Adamczyk
said the job market remains competitive. With the layoffs in technology, though, Mr. Adamczyk said he anticipated that the labor market would likely soften, potentially also expanding the applicants Honeywell could attract.
“We’re probably going to be even more selective than we were before because we’re going to have a broader pool to draw from,” he said.
Across the corporate sphere, many of the layoffs happening now are still small relative to the size of the organizations, said
Denis Machuel,
CEO of global staffing firm Adecco Group AG.
“I would qualify it more as a recalibration of the workforce than deep cuts,” Mr. Machuel said. “They are adjusting, but they are not cutting the muscle.”
Write to Chip Cutter at chip.cutter@wsj.com and Theo Francis at theo.francis@wsj.com
The plane maker said it is benefiting from a recovery in air travel in recent months, and has been delivering new planes to satisfy growing demand for flights.
Boeing has sold more jets than rival
Airbus
SE this year, and efforts to cut costs have helped reduce the drain on its finances. But it is still hampered by manufacturing problems that have frozen most 787 deliveries for much of the past year and technical issues that forced its Starliner spacecraft launch to be scrubbed.
The company took a $183 million charge in the latest quarter to cover disrupted Dreamliner production, which has been slowed to about two a month from around five after Boeing accumulated more than 100 jets awaiting delivery. Boeing estimated on Wednesday the cost of the disrupted production could be as high as $1 billion.
The $185 million charge on the Starliner space taxi follows a $410 million hit last year to pay for a new launch after the first in December 2019 failed to reach the correct orbit. Faulty valves thwarted another launch attempt during the summer, with the flight now delayed until next year.
A new type of defect on Boeing’s Dreamliner aircraft surfaced recently, the latest in a series of issues that have led to a halt in deliveries. The company now has more than $25 billion of jets in its inventory. WSJ’s Andrew Tangel explains how Boeing got here. Photo: Reuters
Boeing Chief Executive
David Calhoun
said in an internal message Wednesday the charges reinforced “the importance of our efforts to enhance our own performance and drive stability in our operations.”
Mr. Calhoun likened work on the Dreamliner to earlier fixes of the 737 MAX, noting the company’s plans to produce 31 of those jets a month early next year, up from 19 currently. Boeing made various fixes to the MAX jet’s software, hardware and related training package while regulators grounded the aircraft for nearly two years.
The net loss of $132 million in the quarter compared with a $466 million loss in the year-ago period. Sales climbed 8% to $15.3 billion. The per-share loss of 19 cents compared with 79 cents a year earlier.
Boeing burned $262 million in cash during the quarter compared with $4.8 billion a year earlier. The improvement was helped by cost cuts, receipts from airplane deliveries and a tax gain. The core loss of 60 cents, which excludes pension costs, was better than the loss of 20 cents estimated by analysts polled by FactSet.
The company’s shares were slightly lower in morning trading.
Boeing’s services arm was its most profitable in the quarter. Sales of spare parts is an area of growth for aerospace right now as airlines return parked aircraft to service, and revenue at the services unit in the quarter almost matched those of the core commercial airplanes business.
Over the past year, Boeing has been dealing with a series of production defects with its 787 Dreamliner, the popular wide-body jet often used on long-haul flights. The manufacturing problems have drawn increased scrutiny from the Federal Aviation Administration.
The plane maker has built up an inventory of more than 100 Dreamliners worth more than $25 billion as it addresses defects and seeks regulatory approval for inspections before handing over the jets to customers.
Boeing expects to boost production of its Dreamliner after it resumes deliveries—though Mr. Calhoun said on CNBC he couldn’t predict when that would happen. The market for wide-body jets has been depressed during the Covid-19 pandemic as countries around the world imposed travel restrictions. That has eased pressure on Boeing while it addresses Dreamliner production issues.
Boeing has been hoping for significant aircraft deals with Chinese customers amid continued U.S. trade tensions with the country. China’s aviation regulators haven’t approved the 737 MAX to resume flying customers, but Mr. Calhoun said on CNBC the authorities have been working hard on the aircraft’s recertification.
Write to Doug Cameron at doug.cameron@wsj.com and Andrew Tangel at Andrew.Tangel@wsj.com
General Electric Co. is nearing a $30 billion-plus deal to combine its aircraft-leasing business with Ireland’s
AerCap
AER 1.62%
Holdings NV, according to people familiar with the matter, the latest in a string of moves by the industrial conglomerate to restructure its once-sprawling operations.
Though details of how the deal would be structured couldn’t be learned, it is expected to have a valuation of more than $30 billion, some of the people said. An announcement is expected Monday, assuming the talks don’t fall apart.
The
GE
GE 0.29%
unit, known as GE Capital Aviation Services, or Gecas, is the biggest remaining piece of GE Capital, a once-sprawling lending operation that rivaled the biggest U.S. banks but nearly sank the company during the 2008 financial crisis. GE already took a major step back from the lending business in 2015 when it said it would exit the bulk of GE Capital, and a deal for Gecas would represent another big move in that direction.
It would also represent another significant move by GE Chief Executive Larry Culp to right the course of a company that has been battered in recent years by souring prospects for some of its top business lines and a structure that has fallen out of favor with investors.
With more than 1,600 aircraft owned or on order, Gecas is one of the world’s biggest jet-leasing companies, alongside AerCap and Los Angeles-based Air Lease Corp. It leases passenger aircraft made by Boeing Co. and
Airbus SE
as well as regional jets and cargo planes to customers ranging from flagship airlines to startups. Gecas had $35.86 billion in assets as of Dec. 31.
AerCap has a market value of $6.5 billion and an enterprise value—adjusted for debt and cash—of about $34 billion, according to S&P Capital IQ, and around 1,400 owned or ordered aircraft. The company has experience in deal making, paying around $7.6 billion in 2014 to buy International Lease Finance Corp. AerCap’s revenue last year was about $4.4 billion, down from around $5 billion in the previous few years.
The aviation business has been hit hard by the Covid-19 pandemic, which has resulted in a sharp drop in global travel and prompted airlines to ground planes. Some airlines have sought to defer lease payments or purchases of new aircraft. Gecas had an operating loss of $786 million on revenue of $3.95 billion in 2020. GE took a roughly $500 million write-down on the value of its aircraft portfolio in the fourth quarter.
Combining the companies could afford cost-cutting opportunities and help the new entity weather the downturn.
Separating Gecas could help GE with its efforts to shore up its balance sheet and improve cash flows. Despite a recent increase, GE’s share price remains below where it was before significant problems in the company’s power and finance units emerged in recent years.
The Boston company has a market value of around $119 billion after the shares more than doubled in the past six months as it posted improving results. Still, the stock has fallen by about three-quarters from the peak just over 20 years ago.
Mr. Culp became the first CEO from outside of GE in late 2018 after the company was forced to slash its dividend and sell off businesses. The former
Danaher Corp.
boss has sought to simplify GE’s wide-ranging conglomerate structure further, as other industrial giants such as Siemens AG and
Honeywell International Inc.
have done in recent years.
Activist investor Trian Fund Management LP, which has owned a significant position in the company since 2015 and holds a seat on its board, has supported such changes.
Early in his tenure, Mr. Culp said he had no plans to sell Gecas, a move his predecessor
John Flannery
had considered after the unit drew interest from private-equity firms pushing further into the leasing business.
Mr. Culp has sought to even out cash flows and refocus on core areas. Operations he has parted with include the company’s biotech business, which was purchased by Danaher in a $21 billion deal that closed last year. GE also sold its iconic lightbulb business in a much smaller deal last year, and previously said it was unloading its majority stake in oil-field-services firm Baker Hughes Co.
GE has cut overhead costs and jobs in its jet-engine unit while streamlining its power business. The pandemic continues to pressure the jet-engine business, GE’s largest division, however.
The company also makes healthcare machines and power-generating equipment, and the rest of GE Capital extends loans to help customers purchase its machines and contains legacy insurance assets too.
AerCap is based in Ireland and Gecas has headquarters there as well. The aircraft-leasing industry has long had a significant presence in Ireland due to the country’s favorable tax regime and the importance of Guinness Peat Aviation in the development of the sector. (A deal between GE and AerCap would reunite two companies that bought their main assets from GPA.) The industry has gotten more competitive as Chinese companies have gained market share, however, and the combination could help the new group stem that tide.
Shares in aircraft-leasing companies plummeted along with much of the market in the early days of the pandemic as demand from major airlines, who lease planes to avoid the costs of owning them, evaporated. But many of the major lessors’ stocks have recovered lost ground and then some in the months since as lockdowns ease and the outlook for travel improves.
AerCap’s Chief Executive Aengus Kelly said on its fourth-quarter earnings call this month that he expects airlines to shift more toward leasing planes as they rebuild their balance sheets, in what would be a boon to the company and its peers.
“Their appetite for deploying large amounts of scarce capital to aircraft purchases will remain muted for some time,” he said. “The priority will be to repay debt or government subsidies.”
—Thomas Gryta contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com and Emily Glazer at emily.glazer@wsj.com