Airbus mulls A320 output increase to 50/month from 2017

February 24
11:36 PM 2015

European planemaker Airbus is talking to suppliers about the possibility of raising production of its A320 family of aircraft to 50 jets a month as early as 2017, narrowing a gap with rival Boeing (BA.N), a senior industry source said on Tuesday.

Airbus has asked suppliers to be ready to adjust to production of 48 aircraft a month during 2016, rising to 50 a month in 2017, the source said, asking not to be named.

The increase would stretch an existing target that calls for 46 of the single-aisle jets a month by the second quarter of 2016, up from a current rate of 42. There can be a lag between supplier schedules and aircraft production.

A spokesman for Airbus declined to comment ahead of Airbus Group (AIR.PA) annual results due to be released on Friday.

Airbus jet division Chief Executive Fabrice Bregier last month declared the supply chain "stable" in a sign of potential output hikes, but acknowledged differences between sales and production teams about when to take the next step.

He promised a decision by June.

Another industry source said it was not a matter of 'if' but 'when' Airbus would increase output despite analyst warnings that the commercial aerospace cycle has peaked, which have helped to push down aerospace stocks.

Airbus shares ended the day down 1.9 percent at 51.9 euros. Boeing fell 2.3 percent on Monday.

"We think if you look forward there are increasingly too many aircraft going into the market," aerospace analyst Nick Cunningham of UK-based Agency Partners said.

"Production rates are rising so what is already creating a bit of stress in Asia and Europe will get progressively worse as time goes on."

Raising output involves an orchestrated effort by hundreds of suppliers just as the planemaker embarks on the delicate task of switching to a revamped A320, starting late 2015.

Airbus and Boeing have been battling for market share between their best-selling models since announcing fuel-saving upgrades earlier this decade.

Boeing has announced plans to raise production of its 737 model to 52 a month in 2018 from 42 now. It plans to reach 47 a month in 2017. Industry sources say it has started consulting suppliers on whether they could eventually handle 58 a month.

The medium-haul jets are a significant source of cash for both companies.

Airbus is also reviewing production of the larger A330, which faces competition from Boeing's 787 Dreamliner.

It makes 10 A330s a month and plans to trim this to nine. Analysts believe it could have to cut to as few as six.

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