Group is taking a €434 million ($594 million) extraordinary charge against its 2013 results for the Airbus program, as the company struggles with higher-than-expected recurring costs for the new widebody aircraft.
CEO Tom Enders says he cannot guarantee that the charge will be the last related to the aircraft. He admits that “it is a sizeable charge,” but stresses that the A350 will “still be a competitive program.”
“We continue to make progress on the A350,” Chief Financial Officer Harald Wilhelm said at the Airbus Group’s annual press conference in Toulouse. The company confirmed its plan to deliver the first A350-900 before the end of this year to.
Airbus also met its target of putting MSN002 and MSN004—the third and fourth A350 test aircraft—into the air before the end of February. MSN002 flew this morning, and MSN004 followed in the afternoon. MSN002 is the first A350 with a full passenger cabin installed.
However, Wilhelm highlights that while flight tests are going well, the challenges of the industrial ramp-up are beginning to kick in and more supplier issues are emerging. “We are stepping up the industrial ramp-up,” says Wilhelm. That process is resulting in “higher costs” than expected. A bottom-up review of the A350 has shown that the actual recurring costs of producing the aircraft are higher than forecast.
According to Wilhelm, additional work for late design modifications are partly to blame, but he also pointed to “some manufacturing disruption” at Premium Aerotec. He concedes that the manufacturing processes at Premium Aerotec “are not completely robust,” and “deep industrial restructuring is needed.” The Airbus Group subsidiary, based in Augsburg, Germany, builds the A350’s fuselage section 13/14 and the panels for section 17/18.
Premium Aerotec is battling with the difficulties of transitioning to a new technology and setting up essential corporate structures at the same time. But like other A350 suppliers, it has a steep ramp-up in front of it. According to industry sources, Premium Aerotec is due to deliver 20 shipsets in 2014, 43 in 2015, 82 in 2016, 116 in 2017 and 139 in 2018. That reflects Airbus’s target to raise A350 output to two units per month by the end of this year, gradually going up to ten per month by 2018. The 139 shipsets targeted for 2018 seem to indicate that A350 production could go beyond the ten-per-month goal in 2019, although Airbus has not mentioned that option so far.
Airbus is introducing the A350 in three batches. Batch 1 includes the first four test aircraft, while batch 2 spans from MSN005 to MSN20. The most significant changes to the aircraft are made from batch 2 to batch 3. Many of them are related to the cabin, but wing components and structural parts of the fuselage are also likely to be affected. Most of the cabin work is done by Diehl Aerosystems.