Airbus to add assembly line in Alabama to build more A320 jets

Airbus to add assembly line in Alabama to build more A320 jets
An Airbus A320 for Delta Airlines makes its initial flight from the Mobile assembly plant. (Airbus)

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, including a new final assembly line at its Alabama plant.

The figure represents a jump from a monthly rate of about 50 for the narrow-body planes right now and the 65 targeted for the middle of 2023, and comes as demand recovers from the pandemic, the European company said. 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-19 lockdowns in China make building and operating aircraft more challenging. The firm reported first-quarter earnings that beat analyst 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.”

Airbus has been seeing a rise in manufacturing of aircraft like the A320 as air travel increases. (Bloomberg)

Suppliers and leasing firms had initially pushed back against the pace of the planned construction ramp-up, before Airbus recently secured an 18-month extension to key engine-supply contracts. The hike should help the company 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 narrow-body production rate trails its rival, with the U.S. company saying last week that it was producing 31 of its 737 Max narrow-bodies 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,” said Bloomberg Intelligence analyst George Ferguson.

Engine supplier Safran SA acknowledged 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, Airbus said, as well as investment to ensure all assembly plants can handle the largest A321 model. Details of the Alabama expansion were not provided.

Increased manufacturing in Mobile will 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 has already invested more than $1 billion expanding its production operations at the Mobile Aeroplex at Brookley in Alabama. (Airbus)

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 $1.3 billion in the first three months.

A part-assembled LEAP-1A engine for Airbus SE A320neo passenger aircraft during assembly inside the Safran SA plant in Villaroche, France. (Bloomberg)

Results were helped by a one-time gain of $420 million from a remeasuring of pension obligations. At the same time, earnings took a $210 million 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.

Airbus also reiterated a free cash flow target of $3.7 billion for 2022 before customer financing and spending on acquisitions, about the same as last year, and an increase in adjusted EBIT to 5.8 billion.

XLR slips

Less positive for the company are issues complicating the introduction of its new A321 XLR extra long-range jet, which it 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 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.

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