Airbus SAS could cope with losing as many as 1,000 jetliner contracts without suffering unduly because of its “formidable” order book, chief executive officer Tom Enders said.
Airbus is able to withstand its backlog of 3,500 contracts shrinking somewhat, Enders told journalists in Paris on Saturday. If the order book kept growing customers would have to wait seven or eight years between contracts and deliveries, something that might deter carriers from buying, he said.
“So 3,500 orders — make it 3,000, 2,500, whatever number you might take — this is still five years of maximum production,” Enders said in a briefing given ahead of the Paris Air Show, which began yesterday.
PHOTO: BLOOMBERG
Cancellations to date have left Airbus with a client base for this year and next that is “clearly of a higher quality than a year before,” Enders said, repeating chief salesman John Leahy’s comment that “the weak sisters have left the backlog.”
As struggling airlines scrap or defer orders, the aircraft maker is seeking “stronger” customers to accept the vacant production slots and keep its assembly lines running smoothly, he said.
Airbus’s planning at the moment amounts to “crisis management,” Enders said, the key consideration being to avoid building “whitetails,” or planes that have to be stored without an airline logo after buyers can’t pay for them.
The world’s biggest planemaker had won 11 net orders through last month after selling 32 planes and suffering 21 cancellations. Boeing Co, the No. 2, collected zero orders in the first five months as 65 purchases were wiped out by an equal number of cancellations. Both subtract cancellations of planes ordered in prior years from the current year’s order intake.
One way that Airbus, a unit of European Aeronautic, Defence & Space Co, can retain orders is by helping airlines to finance purchases. The company expects to provide 1 billion euros (US$1.39 billion) in loans this year and will increase that next year and 2011 if necessary, Enders said, adding that banks were still reticent about providing money to carriers.
“We’re not a bank, not a charity organization, so we have to use funds dedicated to customer finance on a very select basis and pick out those most important to us, pick out the winners,” he said. “We have some leeway here.”
Deliveries in 2011 are likely to fall 15 percent to 25 percent short of the number envisaged in an earlier plan as the recession takes its toll, the CEO said.
Enders didn’t rule out further production cuts and said that Toulouse, France-based Airbus has “various, sophisticated scenarios.”
The company in February cut production of single-aisle planes to 34 a month from 36, scrapping plans to jump to 40. It froze widebody output at 8.5 aircraft instead of increasing it to 10.
A target of 300 new orders this year is also looking increasingly doubtful, he said, while adding that Airbus won’t slash prices to bring in business.
“The priority is to not sacrifice margins,” he said.
Airbus’s earnings in recent years were hurt by poor margins on planes that were contracted for before Enders became CEO. Margins are improving on more recent orders, he said, without giving numbers.
The CEO said that only the 525-seat A380 superjumbo has so far been immune to outright cancellations, other than for a freighter version, which has been shelved.
“I think it’s quite a miracle after what the program has done,” he said.
A380 deliveries have been running more than two years behind schedule after difficulties.
Airbus parent EADS is based in Paris and Munich.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS