Scrapping multimillion-euro airliners and replacing them with new ones is good for the environment and the economy, argues Airbus CEO Guillaume Faury.
In an interview with POLITICO this week, Faury said his company is pushing Brussels to adopt a rebate scheme similar to that used in the U.S. in the aftermath of the financial crisis to keep the car industry solvent, known as cash for clunkers.
With the EU keen on ensuring a green recovery from the crisis, Faury argued the idea could keep business open and make the industry greener.
“Instead of taking an old Boeing 777 for instance back to service, they could take a brand new [Airbus] 350 or 321 with very, very good economics and CO2. And if you subsidize that, you make a big step forward in terms of CO2 in aviation,” Faury said.
That view doesn’t find much favor with green groups — which are worried about airline greenhouse gas emissions and want a rethink of the world’s current reliance on flying. The Commission’s recovery plans do not currently include such a scheme.
Faury also said the coronavirus-induced crisis in the aviation industry compelled his company to “rebuild our business almost from scratch,” and that it would take years for airplane demand to climb back to pre-pandemic levels. The aerospace giant cut its production rate by a third to adjust to the collapse in demand — and further changes could follow. Faury warned that redundancies are likely.
While the company is not seeking a bailout and says it has enough cash reserves, Faury said the EU could earmark its green stimulus packages to help keep Airbus and thousands of its suppliers to help focus on airline-fleet renewal. The French government did that in its €7 billion rescue of Air France, saying the bailout could spur future purchases of Airbus aircraft.
“There is a lower level of demand so we need less planes, so let’s retire the old planes, the ones which are burning a lot of fuel and raising a lot of CO2 and support the faster transition to new planes by a support scheme — and we think there’s a good business case for doing this for Europe,” Faury said. “They would help airlines to retire their old planes and take new ones instead of putting the old ones back to service.”
Pressuring airlines
Most of Europe’s big airlines have announced a tentative return to service in an effort to salvage what they can of the holiday season. But most will operate at a fraction of their capacity as border restrictions persist and many travelers decide to stay put. With airlines struggling to fill the planes to do have, many are looking to delay or cancel their new orders with Airbus and Boeing— made when business was good.
Asked about how the pandemic has affected Airbus’ relationship with its customers, Faury said, “This is the moment where you see what the relationship means.”
He said that while he empathized with airlines’ plight, “they have commitments with us and we have taken commitments [to our suppliers] because of the contracts we have with them.”
Without naming them, Faury said some airlines wouldn’t answer the phone at the height the of crisis. “They did not want to pick up the call, they didn’t know what to say.”
He hoped to find a compromise now that many airlines have been rescued and the worst of the crisis is over. “We are hoping with many customers, trying to adjust what is tough for them but not killing them and tough for us but not killing us.”
Still, Faury warned of lawsuits if airlines rip up contracts. “It will remain, I hope, the exception because we always try to find a different route than going to court. But if and when airlines — and it’s happening — have no other choice than fully defaulting and not proposing something better than nothing, or are not willing to do it, then [court cases] will happen.”
Transatlantic tit-for-tat
Faury said he hoped the World Trade Organization would allow Brussels to impose sanctions on U.S. products because of the illegal subsidies archrival Boeing received from U.S. authorities. The WTO is expected to rule this month on the extent of the harm caused to Airbus as a result of the U.S. subsidies. The ruling follows a parallel case in which the WTO allowed the U.S. to impose $7.5 billion worth of sanctions on EU products, including aircraft, as a result of illegal subsidies that Airbus received from European governments.
Faury hoped the expected European sanctions would get Boeing to the negotiating table.
The Commission “should try to achieve a level of pain for both sides that is big and that is similar so no party has an interest to stay in that situation,” Faury said. “And from what I hear, this is what the EU will be doing. At the end it’s a bit on the U.S. to decide what they want to do.”
If Washington decides to stick with the tariffs, “I believe it’s a lose-lose for everyone,” he said.
Brexit blues
The Airbus chief has been a vocal opponent of a no-deal Brexit.
The wings for all of Airbus’ commercial aircraft are made in the U.K., and that business is under threat if the U.K. and the EU don’t reach a deal by the end of year, Faury said. “Unfortunately we have not observed much progress on the Brexit side and it’s really a pity. We need an agreement and now time is passing by dangerously, I believe.”
Faury said the risk of a no-deal Brexit is “still real.”
“Obviously [Brexit] went down the priority list [during the pandemic] but now it’s coming up again,” he said, adding he is considering recycling the company’s contingency plans made last year during talks over the Withdrawal Agreement, “but I hope we have enough problems not to add one more on the list.”
“I hope a bit like the WTO at the end wisdom will prevail and those stakeholders will manage to find agreements for the future.”
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