BAE Systems announced nearly 1,700 job losses and the closure of its regional jet business this week, following a review of the impact of the September 11 terrorist attacks on its commercial aerospace operations.
The hardest-hit site will be the Woodford plant, which will lose 993 of its 1,700 employees. Chief executive John Weston said: ‘Regrettably it has been concluded that our regional jet business is no longer viable in this environment.’
The other jobs will go at Chadderton (299), Prestwick (219), Samlesbury (140), and Filton (18). BAE will take a £250m exceptional pre-tax charge in its 2001 accounts to cover the closure of the business.
Order of the day
The timing of the closure – and some of the lay-offs – could be delayed if two provisional orders for the latest variant of the regional jet, the RJX, are confirmed. The main one is an order for 12 planes, with an option for a further eight, from the British European airline.
‘If they say they want them, we will make them,’ said a spokesman. Otherwise, the company will simply complete the four earlier versions of the jet that are currently on the assembly line and shut the business next year.
The terrorist atrocities have also had an impact on the Airbus business, in which BAE has a 20% stake. The company now expects Airbus to deliver 300 planes in 2002 – 30 fewer than previously projected.
However, the venture does not face the savage cutbacks that Boeing has had to make thanks to a decision just after September 11 not to proceed with a plan to ramp up capacity to 360 planes a year.
‘Whereas Boeing had to hit the brakes hard, Airbus has just had to lift its foot off the accelerator,’ said the BAE spokesman. ‘What you don’t want to do is chase a falling market.’
While the company’s statement said Airbus was expected to continue to trade profitably at this level of output, it alluded to ‘additional actions’ under way to maintain the returns, including ‘substantial use of contract labour’.
And while it hopes the job cuts announced this week will draw a line under its exposure to the commercial aerospace sector, it will rule out more losses should there be a further market deterioration.
The downturn in the civil aerospace business is being offset for the company, however, by hugely improving prospects in the defence sector. The selection of the group headed by Lockheed Martin, in which BAE has a 15% interest, to develop and build the new three-variant joint strike fighter (JSF) for the US and UK armed forces will create 2,200 jobs in Britain during the development phase up to 2008.
The company is currently trying to recruit 500 engineers who specialise in disciplines such as systems, software avionics and airframes – 400 of whom will be assigned to the JSF project.
Once the production phase begins for the initial order of 3,000 planes, the number of UK jobs required on the project will rise to 4,000. The spokesman said the undertaking would be worth £15bn to BAE up to the completion of this order, with the prospect of further orders for as many planes again from other countries.
Forces for the good
The military aircraft business will be enhanced when the Eurofighter Typhoon goes into production next year and from further orders for the Hawk trainer aircraft. The remainder of the engineers the company is currently recruiting will be dedicated to these projects.
Another massive boost to BAE’s defence business could come from a contract to build the UK’s next generation of aircraft carriers – two 60,000-tonne vessels that will give the British armed forces an unprecedented capability and will certainly cost several billion pounds to design and build. BAE is in competition with France’s Thales.
The war in Afghanistan should also bolster the defence business as the US and UK armed forces will need to replenish their inventories of cruise missiles and other weapons – and replace any losses of hardware such as helicopters.
‘Presumably, there will be a period when they want to restore their stocks to where they were,’ said the spokesman.