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Airbus to Build 75 A320 Jets a Month by 2025 as Travel Rebounds

Airbus to Build 75 A320 Jets a Month by 2025 as Travel Rebounds

Airbus SE is pushing ahead with ambitious plans to ramp up production of its bestselling A320 family of jets to 75 a month by 2025.

The figure represents a jump from a current monthly rate of about 50 for the narrow-body planes and the 65 targeted for the middle of 2023, and comes as demand recovers from the coronavirus crisis, the European manufacturer said Wednesday. It will construct a new U.S. assembly line to help meet the goal.

Airbus reiterated a forecast for at least 720 jetliner deliveries this year, even as the war in Ukraine and Covid lockdowns in China make building and operating aircraft more challenging. The firm reported first-quarter earnings that beat analysts’ estimates and backed prior financial targets for 2022.

“We have a very strong demand and therefore we have assessed the ability of the supply chain to continue to grow beyond 65,” Chief Executive Officer Guillaume Faury said in a Bloomberg Television interview. “The supply chain is capable of doing this, we have the demand for it and so we decided to go.”

Suppliers and leasing firms had initially pushed back against the pace of the planned construction ramp-up, before Airbus secured an 18-month extension to key engine-supply contracts last week. The hike should help the firm consolidate its advantage over Boeing Co. in a single-aisle jet market that dominates sales, reducing production backlogs and freeing up delivery slots.

Securing Capacity

Boeing’s current narrowbody production rate trails its rival, with the U.S. company saying last week that it was producing 31 of its 737 Max narrowbodies a month and that moving beyond that rate was “a future decision that we’re not prepared to take” at the moment.

Airbus’ plans mean the company “will secure more supplier capacity making it harder for Boeing to get up to 60 when the time comes,” according to Bloomberg Intelligence analyst George Ferguson. 

Engine supplier Safran SA acknowledged last week that Boeing’s decision to keep the Max at 31 planes a month makes it easier to support the Airbus A320 ramp up. 

U.S. Footprint

Meeting the higher production goal will require increased capacity at existing factories and the addition of a second final assembly line in Mobile, Alabama, Airbus said, as well as investment to ensure all assembly plants can handle the largest A321 model.

Increased manufacturing in Mobile will also enhance proximity to U.S. customers, just as an assembly line in Tianjin, China, does with airlines in that country, Faury said. Chinese production is difficult right now with the new coronavirus outbreak, though plane handovers continue, aided by so-called e-deliveries in which customers sign off remotely, he said.

Airbus continues to expect to increase production of the A350 wide-body model from about five per month now to around six in early 2023.

Sanctions Hit

The Toulouse, France-based manufacturer’s adjusted earnings before interest and tax increased to 1.26 billion euros ($1.3 billion) in the first three months, from 694 million euros a year earlier.

Results were helped by a one-time gain of 400 million euros from a remeasuring of pension obligations. At the same time earnings took a 200 million-euro hit from the impact of sanctions on Russia. On a net basis the figure still represented a “solid” 20% beat compared with consensus, Jefferies International analyst Chloe Lemarie said in a note.

Airbus also reiterated a free cash flow target of 3.5 billion euros for 2022 before customer financing and spending on acquisitions, about the same as last year, and an increase in adjusted Ebit to 5.5 billion euros.

XLR Slips

Less positive for the company are issues complicating the introduction of its new A321 XLR extra long range jet, which Airbus said will slip into 2024 amid certification delays.

Bloomberg reported Tuesday that the model is under scrutiny from regulators amid concerns about increased fire risk from an extra fuel tank, with safety improvements likely to add weight and slightly curb its range.

Faury said on the call that no material changes to the specification and range of the plane are “to be shared today.” He added that Airbus is in the process of maturing its design.

©2022 Bloomberg L.P.