GE Aviation Cuts Workers, Prepares For Market Falloff

The GE9X, which has a larger fan and uses more composite materials than its GE90 predecessor, is anticipated to have more than 1,400 deliveries over the next decade. GE Aviation announced its GE Wales site as an MRO facility for the GE9X, while the likes of Xeos, a Poland-based joint venture between GE Aviation and Lufthansa Technik, started operating last year to cater for GE9X overhauls along with the GEnx engine.
Credit: GE Aviation

GE Aviation, the leading division within General Electric, is cutting 10% of its U.S. workforce as it anticipates a steep falloff in maintenance, repair and overhaul (MRO) work for three months, and it will continue to let go outsourced workers in the wake of the novel coronavirus, the company’s head executive said March 23.

The multi-industrial company will also prolong a hiring freeze put in place in recent weeks, and reconfirmed other measures taken such as canceling salaried merit increases and a “dramatic” cut of “all nonessential spending.”

David Joyce, vice chairman of GE and president and CEO of GE Aviation, will forgo half of his cash salary starting April 1, and GE chief executive Larry Culp said he would forego all of his salary.

“The aviation industry is feeling the impact of this global pandemic most acutely,” the company said in a prepared statement. “The rapid contraction of air travel has resulted in a significant reduction in demand as commercial airlines suspend routes and ground large percentages of their fleets. As a result, GE Aviation is announcing several steps that, while painful, preserve our ability to adapt as the environment continues to evolve.”

The announcement marks a reversal of the company’s outlook from late February when top executives confidently told Wall Street and others they expected the COVID-19 illness to be just a blip for the aerospace industry. At the time, they said it was not worth laying off staff because they wanted to be positioned for a recovery.

“With regard to our financial position, our company is sound. However, what we don’t know about the magnitude and duration of this pandemic still outweighs what we do know,” Culp said.

Culp also noted that while GE supports efforts by the U.S. government to preserve the aviation industry and protect the broader economy, “we have not sought any provisions in stimulus bills that would benefit GE exclusively.”

It was not immediately clear how closely workforce cuts were tied to MRO business expectations or whether GE Aviation would make cuts elsewhere in its engine manufacturing businesses, for instance. In its statement, GE said: “There will be a temporary lack of work impacting approximately 50% of its U.S. maintenance, repair and overhaul employees for 90 days.” 

Both GE and financial analysts warn, however, that the coronavirus crisis is affecting forecasts across the company. For example, GE Healthcare is taking a hit as business falls for certain medical equipment used in elective procedures that are being postponed or canceled as hospitals try to free up space for virus patients.

Other risks loom. “Prepayments received for engines delivered to Boeing remain a watch item,” UBS analysts noted in a March 23 note to investor clients. “Investors have also been concerned about interest rate movements.”

Michael Bruno

Based in Washington, Michael Bruno is Aviation Week Network’s Executive Editor for Business. He oversees coverage of aviation, aerospace and defense businesses, supply chains and related issues.