Airbus’s global footprint now a burden as sector shrinks

Bloomberg

Over the past dozen years, Airbus SE has grown from a European planemaker with purely local production into a global manufacturer with assembly lines on three continents that give it more clout to win orders around the world.
But as the aviation industry enters its most dramatic downturn ever, the company is finding that broad reach turning from an asset into a burden.
Senior management came together on a conference call on June 5 to discuss their response to the crisis, people familiar with the discussion said. Chief Executive Officer Guillaume Faury had already warned that Airbus must act to cut staff because it’s bleeding cash. Highlighting the urgency, the planemaker garnered zero new orders and just 24 aircraft deliveries for the month of May.
Airbus already cut production targets, adapting to the new reality in the immediate aftermath of a global travel lockdown that started in mid-March. But with airlines warning that a recovery won’t be imminent, manufacturers face the tough question of whether deeper cuts are needed, and where the ax should fall first.
“They’ve got to decide what size of production system they want to meet that new level of demand,” said Sash Tusa, an analyst at Agency Partners LLC in London. “The big issue there is going to be, can Airbus afford the luxury of having production in five different countries.” Shares in the Toulouse, France-based planemaker fell 1.3%
to 79.93 euros in Paris on Monday.

Chinese Demand
When Airbus set up shop in China in 2008, the final assembly line in the city of Tianjin marked a shrewd strategic move because it widened the local appeal of its popular A320 model. The market now represents nearly a quarter of its commercial aircraft deliveries. Creating a beachhead in Asia was “possibly the greatest decision Airbus has ever made in terms of market entrance,” Tusa said.
The manufacturer similarly turned its US facility in Mobile, Alabama, into an A320 line after American Airlines Group Inc. placed a major order. The smaller A220, acquired from Canada’s Bombardier, is now being made at the site as well.
Airbus said in April that it had no plans to exit either its A220 location in Canada or the Alabama assembly line, which officially opened this month. The US presence allows it to sell to American customers without the tariffs imposed on European aircraft in an ongoing trade spat.
But maintaining that global network is costly. Parts are shipped from locations across Europe, like wings from the UK or fuselage sections from France and Germany.