Covid and Boeing safety fears ‘created worst year in aviation history’
The former Bombardier Aerospace suffered a $0.5bn loss last year, the biggest ever for a local company, the Belfast Telegraph can reveal.
New owner Spirit Aerosystems said it had been “the most challenging year in aviation history” after Covid-19 grounded flights around the world.
The US company said it had faced a “dual crisis” as it contended with the grounding of the 737 Max from Boeing, a major customer, over safety concerns
Newly published Shorts Brothers company accounts, which still bear the original name of the Belfast manufacturer, show losses accelerated from $2m (£1.4m) in 2019 to $500m (£362m).
The business makes aerostructures such as wings, fuselages, engine nacelles and other components.
The accounts say the Shorts Brothers pension scheme will shut from December because its costs are “unsustainable”.
It will be replaced with a defined contribution arrangement.
The accounts add that there will be a continued focus on reducing procurement costs and “labour efficiencies”.
Economist John Simpson said he believed $0.5bn was the biggest ever loss for a company registered in Northern Ireland. However, the extreme conditions of 2020 made it an exceptional year.
“It’s not a good measure of their ability as a company, but it is a serious handicap,” he said.
Spirit projected that revenues would have returned to pre-Covid levels by 2023.
The company said it would be hiring a small number of agency workers and restarting an apprenticeship programme.
Its local workforce stands at around 2,700, almost half the 5,000 it had five years ago, with 500 jobs shed last year.
But the accounts say job losses would have been much worse without the Government’s Coronavirus Job Retention Scheme.
At the peak of the scheme, 84% of the workforce (2,750 people) were on furlough, which saved the company $29m (£21m) in wages. At one point, 656 people were working from home.
Spirit, which is based in Wichita, Kansas, said 2020 had been a “very difficult trading year” but also a pivotal one after it finalised its takeover of Bombardier at the end of October for a total of $865m (£627m).
It was “the most challenging year in aviation history”, the firm told the Belfast Telegraph.
“The company’s response focused on protecting employees, restructuring its cost base, strengthening liquidity, implementing productivity projects and diversifying the business with planned acquisitions, including that of our Belfast operation, which successfully completed in October 2020 as part of a wider transaction with Bombardier.”
There were some costs associated with the Spirit deal, but the company said “a key reason for the scale of the loss is the extraordinary downturn in air travel caused by the pandemic, resulting in lower production rates across our Belfast programmes and a corresponding drop in revenue, driving significantly increased costs into the business”.
However, the deal was good news for the company’s strategy of moving away from relying on Boeing. Buying Bombardier in Belfast means that it now supplies more products to Airbus, including wings for the firm’s A220 jet. It also supplies parts to old owner Bombardier.
Spirit said: “Continuing to look towards the recovery of the aviation industry, we have plans to expand our Belfast wing manufacturing and assembly facility to accommodate ramp-up activity on the Airbus A220 composite wing programme and have taken on additional Airbus engineering capabilities from Spirit’s Wichita site.
“We are in the process of adding a small number of hires to our complementary labour force before year-end and our apprentice recruitment campaign for next year’s intake is under way.”
The company said its future was assured despite the massive $500m loss because it was also making inroads into defence work.
“Our Belfast site is already leading further development of the RAF’s Lightweight Affordable Novel Combat Aircraft concept,” it explained.
“Project Mosquito is supporting high-value engineering jobs in Belfast, allowing us to demonstrate our defence capabilities and placing us in a good position for follow-on work on this programme, as well as for further UK defence contracts.”
DUP East Belfast MP Gavin Robinson said he felt assured about Spirit’s ownership.
“A loss of $500m is massive and could be a cause for concern in isolation, but I feel extremely positive about the future for the company in Belfast,” he added.
“Certainly, I have had more engagement with them in the last five months than over the course of the last five years.”