Airbus chops output by third in grim virus hit measure

Bloomberg

Airbus SE slashed its aircraft output by a third in a stark concession to the coronavirus pandemic that’s upended the aviation industry.
The world’s biggest commercial aircraft manufacturer now plans to produce about 48 planes a month across its A320, A330 and A350 programs, it said in a statement. It had gone into the year with a goal of handing over about 880 planes, or an average of 73 per month.
The rapid spread of the virus has caused unprecedented dislocation in the aviation market, with planes grounded worldwide and cash-strapped airlines deferring jet deliveries while seeking bailouts to survive. The demand drop, along with parts shortages and health concerns, has forced Airbus and its US rival Boeing Co to pause production at some plants while sizing up the longer-term damage.
Airbus will produce about 40 of its top-selling A320 narrow-body each month, it said, while reducing rates on the advanced A350 wide-body to six a month. The slower-selling A330 will limp along at two a month, raising a question about whether the program can remain viable. The company plans to assess production on a monthly basis, CEO Guillaume Faury said.
“Don’t expect orders to be the name of the game for the next six, nine, 12 months,” Faury said. “We’re managing for the moment, using all the flexibility we have.”
The planemaker said it was still assessing demand for the smaller A220 narrow-body, its newest jet series, and that it wouldn’t alter its plan to wind down the A380 super-jumbo program.
Rapid Reversal
Just months ago, Airbus was aiming for record jetliner deliveries in 2020 and looking at how to speed up its assembly line to clear a large backlog of orders. Now, the situation has reversed with production targets slashed and airlines asking to defer handovers.
Faury said that over-booking was no longer an issue, and that Airbus is mobilising to deal with supply-chain issues and deferral requests.
The company faces a delicate balancing act to offer its airline customers the flexibility they need while also not cutting off income vital to its subcontractors.
Adjusting production was “the right thing to do,” the CEO said, as the company seeks to take a realistic view of what’s likely to be a long-lasting crisis.
Airbus will defer capital expenditures and reduce its cost structure, though Faury ruled out closing factories in the short-term. The European manufacturer also released order and delivery figures for March, highlighting the scale of the challenge the industry faces. Net orders totaled 16 aircraft in March, Airbus said, after 44 cancellations. It managed to deliver 36 planes during the month, as airlines shut down fleets in Europe and North America.
The A220, a fuel-efficient single-aisle that had been selling well since Airbus took over the program from Bombardier, and the A350, a large long-hauler whose appeal has been diminished by the cutback in international flights, felt the brunt of the reductions.