The merging of composites specialist Hexcel (Stamford, Connecticut / USA; www.hexcel.com) and Woodward (Fort Collins, Colorado / USA; www.woodward.com), a manufacturer of controls and components, will not take place as planned. The companies reached a mutual decision to end the merger agreement that was announced this January – see Plasteurope.com of 23.01.2020. As a result of the “increasing impact on both the aerospace and industrial sectors, and global markets broadly,” due to the health crisis caused by the Covid-19 pandemic, the planned all-stock merger of equals was terminated by both companies’ boards of directors. Neither party will be required to pay a termination fee.

The merger would have created a group with a turnover of more than EUR 4.5 bn. Approximately three quarters of this was expected to be generated with integrated systems for the aerospace and defence industries. Both companies supply Boeing.

CEOs Tom Gendron of Woodward and Nick Stanage of Hexcel said, “Although we are disappointed with this outcome, we are confident this is the right decision for our customers, our shareholders and our employees as it allows each of us to dedicate our focus and resources toward ensuring Woodward and Hexcel each remain strong and closely connected with our customers and supply chains during these unparalleled times.”

Hexcel has already put in place several cost-cutting measures due to coronavirus-related impacts on its business. The company’s actions to reduce costs include implementation of a hiring freeze, restriction of travel, reduction of capital expenditures and evaluation of employment levels so that they align with lower customer demand. The composites manufacturer will be reporting its financial results for the first quarter of 2020 on 20 April.

Woodward has likewise implemented measures such as a combination of hiring freeze, layoffs and furloughs, reduction of company officers’ salaries through 2020, company-wide wage freeze, elimination of annual bonus payments for 2020 and limitation of capital expenditures to business-critical items. Gendron had announced his intention to retire one year after the merger with Hexcel closed (sometime in the third quarter of 2020). With the agreement terminated, he now no longer plans to retire and will continue to serve as CEO and president.

Covid-19 has effectively paralysed the aviation sector, with planes grounded across the globe. According to International Air Transport Association (IATA) CEO Alexandre de Juniac, “We have never seen a downturn this deep before.” He said on 14 April that in the latest scenario for the full year, passenger revenues in 2020 plummet 55% compared to 2019 and air traffic falls 48%. The association has estimated that around 25m jobs in the aviation industry are at risk.