Airbus Prepares Single-Aisle Ramp-Up Despite ‘Lack Of Predictability’
Airbus CEO Guillaume Faury warned April 29 that there is a “lack of predictability” as to the expected recovery of the industry as trends have diverged in different regions, even though the company posted relatively good results for the first quarter (Q1).
“Some regions are showing encouraging signs of domestic traffic return,” Faury said as he presented Airbus’ results for the first three months of 2021.
But he pointed out that the lack of coordination of travel restrictions to contain the COVID-19 pandemic in Europe had resulted in travel volumes being “by far worse than in other markets.” Therefore, Europe “is really a concern” for Airbus. So too is India, which has seen a dramatic increase in infections over the last few weeks. The manufacturer does not yet see a direct impact from the Indian crisis. Overall and for the moment, “we stay very prudent,” Faury said.
The relationships with customers are “very diverse,” Faury said. China is “much improved” and the “U.S. is quite bullish.” Some U.S. airlines are therefore considering moving forward deliveries in 2023 and 2024.
Airbus revenues reached €10.5 billion ($12.7 billion) in the first quarter, down from €10.6 billion a year earlier. Commercial aircraft contributed €7.2 billion, Airbus Helicopters €1.1 billion and Defense and Space €2.1 billion. On a group level, Airbus reported a €462 million operating profit and a €362 million net profit. The €1.2 billion positive free cash-flow represented a massive swing from the negative €8 billion in the first quarter of 2020, which was a result of the dramatic unfolding of the COVID-19 pandemic and a €3.6 billion settlement in the Airbus bribery scandal. In Q1 2021 it was mainly driven by the phasing of when Airbus paid for supplies; Chief Financial Officer Dominik Asam described the result as “exceptional.”
Commercial aircraft revenues declined by 4% because of a lower level of services sales, but the unit managed to increase its operating profit from €57 million to €343 million.
Airbus delivered 125 aircraft, three more than in the first three months of 2020. They included nine A220s, 105 A320 family aircraft, one A330neo and 10 A350s. There were 39 orders, compared to 356 a year earlier, 38 of which were for single-aisle aircraft. However, net orders were a negative 61 after Airbus suffered cancellations for 100 units in the first three months.
According to Faury, Airbus continues to prepare the single-aisle ramp-up “for when the market is ready. And that is coming sooner now.” Airbus plans to increase narrowbody output from 40 to 43 per month during the third quarter and to 45 in the fourth quarter, as previously planned. The timing of the introduction of the new A321XLR will remain unchanged. Airbus expects the long-range version of the A321neo to enter service in 2023.
He made clear that there will be a “steep ramp-up” of narrowbody deliveries in 2022. “We have given indications to the supply chain already,” Faury said, though he was not prepared to reveal precise figures publicly yet.
In contrast to what it expects for single-aisles, Airbus anticipates “low rates for a long period of time” in widebody production. The target in the long-haul aircraft market is to “get back to break-even as soon as possible.” Airbus has more than halved rates of the A350 (to below five aircraft per month) and the A330neo (two to three aircraft per month). Production of the A380 is ending this year.
Also, Airbus is “preparing the industrial system of the future,” as Faury put it, setting up new large aerostructures companies in Germany and France that will be at the core of the system. The new setup will be key “for the next generation of aircraft that will likely have a different architecture than today’s aircraft.” That Airbus is going ahead with the reorganization now is linked to progress on the introduction of its Digital Design, Manufacturing and Services (DDMS) digital platform and “more visibility” of the depth of changes for its next products. The low level of production “provides a window of opportunity to accelerate change,” Faury said.
Faury made clear that Airbus could take further work in-house that is currently outsourced, though that is not related to the reset of its industrial system, he argued. Asked whether there will be a shift in the make or buy strategy, Faury said that “there will be a lot of make but also buy.” The decisions would be made on an individual basis.
While the risks since the outbreak of the pandemic have mainly been on the customer side, Airbus now sees them shifting. “The main risks ahead are in the supply chain,” Faury said. “The roller coaster [ride] is very difficult to manage.” He pointed to engines that could become a bottleneck for the ramp-up again, therefore Airbus is staying cautious in its planning and retains the “watchtowers”—groups of experts that are monitoring certain parts of the industry for trends or issues. “[If] we start to see challenges in the supply side, we need to resolve them before they become a big crisis,” he said.
Faury also indicated that Airbus will become “more aggressive” in the freighter market, particularly in the widebody segment. “We don’t like the idea to remain weak in cargo,” he said. “It is not healthy to only have one player in a segment that has been resisting well.” Airbus is understood to be considering the launch of an A350 freighter variant, though Faury made clear it is too soon for firm decisions.