Airbus Considers Cutting A320 Production Rate
Jan 11, 2009
By Douglas Barrie and Michael A. Taverna
Airbus is examining more closely whether it may need to cut A320 production rates in response to the continuing global economic downturn.
Its narrow-body production rate is now baselined at 36 aircraft a month, as the company deferred an increase to 40 late last year. Industry sources say Airbus is now considering several lower rates, the most drastic of which could take production below 30 A320s per month.
Industry analysts suggest that while a rate of 36 aircraft a month could be sustained for 2009, it would become far more of a challenge in 2010.
"You can see the avalanche coming down the mountain," says Keith Hayward, head of research at the Royal Aeronautical Society. "You just can't tell the size of it yet." He says Airbus's examination is "a wise and cautious move" because the commercial aircraft industry is only just beginning to feel the impact of the global economic crisis.
"We expect to see a wave of cancellations and deferrals from airlines, but right now both Airbus and Boeing are sitting on backlogs for thousands of narrowbodies," says Douglas Royce, a commercial aerospace analyst with Forecast International. "These backlogs are enough to account for years of production at current levels, unless airlines slash orders to the bone. So we expect to see Airbus and Boeing to abandon plans for production rampups and to see lower production in 2010 and 2011 as the manufacturers look to manage the backlogs efficiently and keep production levels as high as possible."
Airbus officials will neither confirm nor deny that the company is re-evaluating A320 production rates. They point out that the company recently announced a pause in the narrow-body rampup at 36 aircraft per month to meet deteriorating market conditions, and CEO Tom Enders suggested then that there is flexibility for adjustments - upward or downward - if needed (AW&ST Dec. 1, 2008, p. 35).
The main final assembly line for the A320 family is in Hamburg, Germany. Aircraft will also start to be delivered from the Tianjin line in China in the middle of this year, reaching a rate of four per month by 2011.
While Airbus's wide-body order book, excepting the A340-500/600, remains robust, some subcontractors worry about the vulnerability of narrow-body orders as the global economy falters.
Marcus Bryson, chief executive officer of GKN Aerospace, which supplies wing structures for Airbus, says that while the A380 appears "pretty secure" and the A330 is "probably secure, . . . the concern is around the narrowbody. The rate is at 36 at the moment," but he suggests this could go down to 30. "[The market] is going to soften; we're not going to be immune," to the broader economic turmoil, Bryson says.
Another industry executive says Airbus is looking at a minimum of four monthly production rate options as it tries to prepare for any weakening of its narrow-body order book.
While Airbus and Boeing remain comparatively bullish in their public statements, Hayward adds that the commercial airline sector traditionally lags behind others in manifesting the effects of a downturn.
Hayward notes that business-class traffic is beginning to fall off, which is one of the first signs of a weakening market in the commercial sector, along with a dropoff in cargo. He points to British Airways' December passenger figures, which showed a 12.1% decrease in premium traffic and a 1.7% fall in non-premium traffic, as indicative of what lies ahead generally.
Short-haul and no-frills airlines also face a challenging market environment, but the impact of the recession has yet to feed through fully to them.
As of Nov. 30, Airbus had suffered only 122 cancellations. However, last week Thai Airways indicated it would postpone by three months payment for six A330 widebodies to be delivered this year, and All Nippon Airways put off plans to purchase the A380 ultra-widebody. Eighty-six of the 122 cancellations were in the single-aisle category. The collapse of U.S. low-cost carrier Skybus alone accounted for 65.
