Wed, Jun 07, 2017 - Page 10 News List

Airbus mulling further A380 output cuts

Bloomberg

Airbus SE is planning a further cut in build rates for the beleaguered A380 superjumbo airliner amid a continuing dearth of new orders for the 525-seat behemoth.

Airbus is assessing how best to drop output to less than 12 airplanes per year, known as “rate one,” that the company in July last year said should be sustainable from next year, the manufacturer’s head of programs said Monday in Cancun, Mexico.

A decision is to be made before the end of this year in the absence of further sales.

“It’s likely that we may have to go below rate one, and we will do that,” Airbus executive Didier Evrard said at a briefing on the sidelines of the International Air Transport Association’s annual meeting. “We will continue to study opportunities to go below, while keeping our program as easy as possible on the financial side.”

Airbus is in talks that could secure fresh commitments for the A380, and the Toulouse, France-based company might also bring forward jets from the existing backlog to bolster rates if it is decided that 12 airplanes per year are necessary to break even on a unit-by-unit basis, sales chief John Leahy said at the briefing.

“I’m trying to maintain 12, he’s trying to protect if we have to go below that,” Leahy said of Evrard’s comments, adding that there is no truth to suggestions that completed A380s are already being parked amid a lack of customers willing to take them.

Airbus shares fell as much as 0.8 percent and were down 0.2 percent at 74.63 euros as of 9:14am in Paris trading yesterday. That pared the stock’s gain this year to 19 percent, valuing the aircraft manufacturer at 57.8 billion euros (US$65 billion).

Leahy said Airbus is seeking to manage the A380 program through “a period of softness in the market for large aircraft” and has not given up on the model.

Still, the production cut announced last year was widely regarded as the beginning of the end for the double-decker, with output to be slashed from a break-even rate of 27 deliveries achieved in 2015.

Airbus last year won no new A380 orders after Iran opted not to go ahead with an outline deal for 12 airplanes. At the same time, the manufacturer handed over 28 aircraft.

Subsequent deliveries had reduced the backlog to 107 as of April 30, although some of those might be vulnerable to cancellation or deferral.

A follow-up order from Dubai, United Arab Emirates-based Emirates Airline, the No. 1 operator of the A380, might now be the only development likely to stave off the program’s demise.

Airbus had wanted to put the A380 on life support until a hoped-for revival in demand fired by Asian economic growth and crowded runways at major airport hubs.

While Emirates is due to have A380s coming off lease in the next few years, it had aimed to replace them with an upgraded variant that Airbus and engine suppliers have been reluctant to develop for a single operator.

The Persian Gulf carrier in December last year also delayed by a year six A380s due this year and the same number scheduled for next year, prompting Airbus to say it would accelerate cost cuts while reiterating the 12 per year production goal.

Airbus still has concerns regarding quality control issues at seats and interiors manufacturer Zodiac Aerospace, Leahy said at the briefing, although the French supplier is catching up with deliveries.

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