Airbus, the world’s biggest aircraft manufacturer, has issued a stark warning to the industry about the future of air travel. According to the company’s chief executive, Thomas Enders, the industry must prepare for the possibility that aircraft growth may be limited to just one or two years. If growth does not continue, or even diminishes, he says, then the global aviation industry will face a “very difficult” future.
Airbus is urging the aviation industry to prepare for a period of sustained growth in air travel after predicting that passenger numbers will rise 3.5% this year. The company said that, after a 1.6% drop in demand in 2018, growth will return in 2019 and 2020 with annual passenger numbers reaching 800 million.
Airbus is telling its key industry partners to prepare themselves for a rebound in passenger demand after the first two years of massive consolidation have reduced the U.S. airlines’ capacity from 100 percent to 80 percent.. Read more about airline news and let us know what you think.
Airbus
EADSY 0.08 PERCENT
SE has a long-term plan to return aircraft production to pre-pandemic levels and tells its suppliers and customers that it is betting that air traffic and demand will recover faster than others expect.
Airbus plans to increase production of its most popular narrow-body aircraft, the A320, to 64 aircraft per month by the second quarter of 2023, higher than the average monthly production of 60 aircraft in 2019. In the longer term, the target is 70 per month by early 2024. According to the company, this number could rise to 75 by 2025.
At the start of the crisis, Airbus cut prices on all its programs by about 40% and reduced A320 production to 40 per month.
The new plan for the A320neo is well ahead of earlier expectations, it said.
Sandy Morris,
an analyst at aerospace firm Jefferies in London. Jefferies forecasts an average production rate of about 52 per month in 2023 and 57 per month in 2024. Airbus shares were up nearly 6% in Europe by midday.
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Industry leaders have repeatedly stated that they expect tourism demand to be below pre-Wall levels in the coming years. Although Airbus has delayed the return of its factories to pre-crisis levels by two years, this essentially means that the aircraft maker is sticking to a more optimistic forecast for the recovery of the aviation industry than many in the sector.
While many other industries are facing serious supply chain bottlenecks and the economy and demand in many places are returning to normal levels, the CEO of Airbus has
Guillaume Forey
It informed its suppliers on Thursday that it expects them to make the necessary investments to provide parts and services for the greatly increased production schedule.
The aviation sector is beginning to recover from the Covid 19 crisis, Forey said in a statement, saying production numbers are improving. The message to our supplier community provides transparency into the industry ecosystem to ensure that we have the capabilities and are ready when market conditions call for it.
In the early 2020s, air travel was almost non-existent as passengers avoided the risk of boarding a plane during a pandemic and governments imposed travel bans to prevent the disease from spreading across borders.
Airbus has reduced its production and has taken advantage of the crisis to restructure its production facilities. At the start of the pandemic, the company had planned to lay off up to 15,000 workers. In addition, the company reorganized factories, consolidated divisions and reorganized business units, including the aerospace divisions, to reduce costs. Forey insists, however, that the pace of production will remain high enough to ensure that Airbus is able to ramp up production quickly when the market starts to recover.
In recent months, some key markets, notably China and the United States, have seen a strong recovery in domestic travel as incidence has declined and vaccination has been relatively rapid in the United States.
Airlines have started buying planes again. Airbus has already received new orders for 87 aircraft this year, including 25 of the largest A320s.
Delta Air Lines Inc.
By promising higher production, Airbus may be able to negotiate better prices from suppliers, who in turn will want to increase their production. It is also a signal to airlines and aircraft lease customers that Airbus is ready to resume deliveries as soon as demand returns. Before the crisis, Airbus and its competitors
Boeing Co.
had to deal with years of order delays, often frustrating customers with late deliveries.
Airbus has clearly decided to put its suppliers to the test to see if they can (and will) actually deliver at higher rates, said Sash Tusa, an analyst at Agency Partners in London. It also sends strong signals to customers, including landlords, that it is able and willing to deliver aircraft in accordance with existing commitments.
Boeing, meanwhile, has outlined plans to increase production to 31 737s per month by early 2022, with further incremental increases based on market demand. Airbus has already announced its intention to reach a production rate of 45 A320s per month by the second half of this year.
Jefferies’ Morris currently estimates Boeing Max production at about five to six aircraft per month. Boeing subsequently delayed and temporarily halted production of the Max after two fatal crashes forced aircraft around the world to make emergency landings.
Airbus on Thursday also unveiled production plans for other aircraft families, including ramping up production of the smallest A220 to six a month by early 2022 and 14 by the middle of the decade.
Airbus is less ambitious in its wide-body aircraft programs, because the industry expects that rebuilding long-range aircraft will take more time. Even before the pandemic, airlines had begun to switch from large aircraft to more flexible, fuel-efficient single-engine aircraft.
Airbus plans to increase production of the A350 to six aircraft per month starting next fall. By five now and up to ten for the pandemic. The airline has not announced an increase in production of the A330 aircraft, which is difficult to sell. Its production will remain at two units per month, whereas before the crisis it was three or four.
Email Benjamin Katz at ben.katz@wsj.com.
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