Airbus to up production in show of confidence

Suppliers told to be ready to support a monthly rate of 47 A320neo-family planes in the second half of 2021

The Airbus A380. The company is planning to up production of the popular A320neo model next year in a show of confidence.

European planemaker Airbus is preparing to ramp up output next year of its most important jet, the A320neo, in a sign of growing confidence on its part that jetliner demand is poised to recover.

While no decision has been made, suppliers have been told to be ready to support a monthly rate of 47 A320neo-family planes in the second half of 2021, Airbus said.

The company slashed the target rate of its popular single-aisle workhorse by a third in April, when demand evaporated as the coronavirus crisis gutted travel demand.

“We plan to maintain the rate 40 up until summer next year and we have asked the supply chain to protect up to rate 47 to be prepared for when the market recovers,” Airbus said.

The optimistic plan is taking shape despite recent setbacks in the air-travel recovery and order deferrals by major airlines.

Analysts have been warning that the production outlook for the European manufacturer and US rival Boeing may not be sustainable. Airbus didn’t say exactly when it expected to gear up, and said it may yet make minor adjustments.

Airbus’ optimism is surprising given airlines’ recent gloom over near-term prospects

“We have done a re-evaluation of the situation after the summer period,” Airbus said. “We have refined the plan for the A320 family programmes based on our current view of the market.”

Airbus and Boeing have been negotiating intensely with lessors and with airlines, who found themselves in sudden distress this year when the coronavirus crisis flattened revenue.

Last week Delta Air Lines, a major customer, delayed $5bn of deliveries until after 2022. AirAsia X, the biggest customer for the A330neo wide-body, has asked to toss out its entire order book as it seeks to restructure its debts.

Boeing, too, is battling with customer setbacks as it prepares to return its grounded 737 Max, the main competitor to the A320neo, back into service after two crashes forced its grounding in March 2019.

American Airlines said it had deferred delivery of 18 Max jets that were due in the next two years. Southwest Airlines, the biggest single customer for the Max, said it is looking to rework its deal starting with four dozen planes scheduled to arrive through 2021.

Airbus has largely managed to avoid order cancellations while Boeing has logged hundreds for the Max, as airlines leverage delays tied to the grounding to get out of contracts now that they don’t want the planes.

Even so, Airbus’ optimism is surprising given airlines’ recent gloom over near-term prospects, said Bloomberg Intelligence analyst George Ferguson.

- Bloomberg