For his last year at the head of Safran, Philippe Petitcolin is celebrating. In 2019, the engine manufacturer generated revenue up 17.1% to 24.6 billion euros. At the same time, the group’s operating profit rose 26.4% to 3.82 billion euros. On examination, the setbacks of the Boeing 737 MAX, immobilized since mid-March 2019, did not weigh on the results. Proof of its good health, the group has decided to pay a dividend up 30.8% to its shareholders.
However, as Safran revealed, Boeing is no longer paying the amount of engines delivered for the 737 MAX, of which the French group is the exclusive supplier. “The engines are delivered, but not paid”, said Petitcolin, during the presentation of the engine manufacturer’s annual results on Thursday, February 27. “Safran has hardly been paid since March 13, 2019”, said the managing director.
Like aircraft manufacturers, engine manufacturers are paid by the companies when the aircraft are handed over. However, for a year, the MAX cannot be delivered to said companies which, in return, refuse to pay. In the second half of 2019 alone, the engine manufacturer’s shortfall amounted to almost 600 million euros. To compensate, Safran has increased its production of Leap engines with Airbus. Above all, the company has reached an agreement – “And it was not easy” with Boeing, said Petitcolin – to have the engines delivered in 2020 adjusted. In addition, the engine manufacturer negotiated a “Schedule with payment terms With the American aircraft manufacturer for payment for engines supplied last year.
“Adaptation plan”
In 2020, Mr. Petitcolin intends to rely on Airbus to compensate for the halt in production of the 737 MAX. CFM, the 50/50 joint venture between Safran and the American General Electric (GE) which produces Leap engines, “Is in discussion with Airbus, which wishes to increase the production rates of the A320”, revealed the managing director. The MAX shutdown should have “A social impact” limited in 2020, predicts the boss of Safran. According to him, “There are no redundancies planned in France”. In return, he launched a “Adaptation plan which requires an effort of solidarity of the whole group, and above all savings in all sectors”.
In this context, short contracts and the use of temporary workers will not be renewed. At the global level, however, the group is about to slash its workforce. The engine manufacturer is expected to cut 2,130 jobs, notably in Morocco, Mexico and the United States. Thanks to these measures, Safran plans to increase its profits in 2020. However, to meet this objective, the engine manufacturer plans to return the 737 MAX to flight in mid-2020. “This is Boeing’s hypothesis, and we have no reason to question it”, concluded Mr. Petitcolin.
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