Next week Airbus will meet with its suppliers, to evaluate how and when it can increase production output to the promised 47 aircraft. More importantly, they will evaluate whether or not they should do so. And if they can afford not to.
Last October, Airbus raised some eyebrows when they announced plans to increase production output to 47 aircraft per month. The number specifically referred to the A320 family. At the time their target was just 40. Before the pandemic, they were producing 60. And their goal was to get to 63 by 2021, progressively adding one more per month, over the following two years.
With production in France, Germany, China, Canada and the United States, these goals didn’t seem excessive. Boeing was in trouble with the MAX, faced delays with the 777X and still had 787 production and teething issues. By contrast, Airbus’ only fly in its production output ointment, was the closure of the A380 line. But as bad as this is, it actually makes space for more A321neo production. And as we saw, they managed to beat their unofficial, post-pandemic goal for 2020 deliveries.Their final tally, they announced yesterday, is 566.
The framework that Airbus outlined last October depended on meeting certain parameters. They would ‘entertain’ the idea of increasing production only if their undelivered inventory ceased to be a problem. That would happen only if airlines began to see a recovery, making production necessary. The whole plan really depended on the performance of several Low-Cost Carriers (LCCs).
Production Output And Airbus Customers
Ryanair, EasyJet and Wizz Air in Europe and Asia’s ‘big three’ (IndiGo, AirAsia, Lion Air) are indicators for LCC ‘health’. And the results are mixed. Ryanair and Wizz Air are bullish for recovery in Europe, while IndiGo is also buying and taking deliveries. The rest do less well. Other LCCs emerge slowly in China, but the picture doesn’t necessarily support a production output increase for Airbus.
This is what the manufacturer will need to discuss with its suppliers. Originally, Airbus hoped to increase production output from 40 to 47 aircraft per month from July. According to Reuters, supply chain sources now put the increase either in the 4th quarter, or in 2022. Airbus itself suggests that the increase could either move further into the future, or begin early but escalate slowly.
Airbus’ discussions with it suppliers involve upfront payments for parts, among other things. With Airbus’ own cash supply depending on deliveries, it is a chicken-and-egg problem. It is a very serious matter. Airbus warns that keeping production output at a low level puts more jobs at risk. The manufacturer has already announced restructuring plans affecting 15,000 jobs.
Again, Airbus’ production output planning here refers to the A320 family. And they have reminded observers that these plans are “a preparation to increase when certain conditions are met. It is not a decision!” By contrast, Boeing’s plans for 737 MAX production, are to reach 31 aircraft per month in early 2022…
We can be sure that Airbus will be looking at vaccination progress around the world, just as intently as the airlines. Last month we saw encouraging signs in summer bookings. Airbus knows that its production output depends on this demand, as the summer draws nearer.