British defence contractor Meggitt will cut 1,800 jobs as the firm embarks on a major cost-cutting programme to cope with the shutdown of the global aviation market.
The cuts, which represent 15 per cent of the engineer’s workforce, are part of a number of measures to be implemented in order to reduce expenditure by £400-£450m this year.
In addition, Meggitt will embark on a hiring freeze and suspend all salary increases for its employees, as well as cutting operational expenditure.
From the second half of the year, chief executive Tony Wood and his senior leadership team will take a 20 per cent pay cut, as will the firm’s non-executive directors.
A spokesman for the firm, which has operations in the UK, US and China, did not yet know where the job cuts would occur.
Meggitt said the reductions were necessary as it is expecting a “significant reduction in demand” across its civil aviation business in 2020.
The airline industry has been one of the worst hit by the coronavirus pandemic, which has forced carriers to suspend operations and ground planes around the world.
Revenue rises in first quarter
The announcement came despite group revenue rising five per cent in the first quarter, mainly driven by a good performance in the defence division, where revenues grew 15 per cent.
Meggitt said its order book for that division remained strong and it expected it to be “robust” through the year.
Jeremy Bragg, aerospace and defence analyst at Redburn, said: “We suspect that the decision to cut staff was not taken lightly, but Meggitt’s early action on costs should stand it in good stead in the event that the social restrictions associated with Covid-19 persist, or a recession.
“A combination of the cost savings measures already announced, £0.7bn of headroom on its existing borrowing facilities at the end of the first quarter, and access to the UK government’s Covid Corporate Financing Facility (CCFF) means that Meggitt’s balance sheet now looks relatively secure.”
Shares in the firm rose 7.5 per cent this morning.