Airbus to increase A320 production despite souring financials

Despite reporting a €763 million ($1.04 billion) net loss in 2009, reversed from a €1.57 billion surplus the prior year, Airbus parent EADS yesterday announced an increase in the monthly A320 family production rate from the current 34 to 36 in December thanks to "continuing demand" and a "record backlog."

The Airbus commercial unit posted an operating profit of €386 million excluding goodwill impairment and exceptional items, an 83.3% plunge from the €2.31 billion earned on a similar basis in 2008. Revenue slipped just 0.6% to €26.37 billion.

But Executive VP-Programs Tom Williams explained, "Leading economic indices and business confidence indicators are showing an upward trend again. . .Thanks to our proactive order book management we have been able to keep production stable during the year of the downturn, but now it is definitely time to think ahead." The A320 family backlog exceeds 2,300 aircraft. The A330/A340 production rate will remain at eight per month.

Interestingly, at last week's SpeedNews Commercial Aviation Industry Suppliers Conference in Los Angeles, both Airbus and Boeing were criticized by industry analysts who questioned why the pair had not reduced production rates for their respective narrowbody lines, given very weak industry fundamentals. John Walsh, for example, noted he had expected significant production cutback announcements in the first half of 2009.

"We are at the tail end of a classic over-ordering cycle," Walsh told attendees, adding that the next step was for Boeing and Airbus "to face the realities of the marketplace and start curtailing production in a meaningful way." Both manufacturers defended the strength of their backlogs at the conference.

Airbus delivered 498 commercial aircraft in 2009 (up from 483 in 2008), including 402 from the A320 family, and is targeting the same number this year. CEO Louis Gallois said in Paris that he expects 20 A380 deliveries in 2010 (double the 2009 number), although he admitted that the Toulouse production line still is not operating at full efficiency and may not for another 1-2 years. "We are not giving a timeframe when we will reach positive territory. It is still some years out," he said regarding the program's bottom line. "The learning curve was too high. Now we target the cost side."

The company expects 250-300 new commercial orders this year. "The full recovery of the aircraft market I estimate not in 2011 but one year later in 2012," Gallois said.

Group revenue was down 1% to €42.82 billion and the operating loss of €322 million represented a reversal from the €2.83 billion EBIT reported in 2008 and resulted from costs related to the delayed A380 and A400M military transport programs as well as €2.5 billion in foreign exchange losses. It expects a 2010 operating profit of some €1 billion. It said its future performance will be "dependent" on its "ability to execute" the A380, A350 and A400M programs "in line with the commitments made to its customers."