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AIRBUS SE

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Airbus fends off growing revolt over jet output plans

10/26/2021 | 01:56pm EST

PARIS/WASHINGTON, Oct 26 (Reuters) - Airbus was forced for the second time in as many days to defend sharp increases in production, after one its engine makers said it did not expect to support plans for a near-twofold increase in the output of A320 jets by 2025.

The exchange with the world's largest aerospace supplier, Raytheon Technologies, comes after Airbus on Monday rejected worries about overproduction from leasing companies.

Engine makers and lessors rely on the attractiveness of existing planes to support their repair revenues or rental fees, putting them naturally at odds with planemakers who make money on new jets. But the balancing act between contrasting business models has erupted into growing tensions since the pandemic.

Raytheon Technologies Chief Executive Greg Hayes said on Tuesday he was skeptical the market would support proposals to lift A320-family output to 75 a month by 2025 from some 40 now.

Rival Boeing is lagging behind Airbus after a safety crisis over its 737 MAX but suppliers say it is aiming for output of 50 or more MAX a month, beyond its current target of 31.

"The question is are we really going to see a market that will support, call it 50 737s and 75 A320s on a monthly basis or 125 airplanes a month," Hayes told analysts.

"We'll be ready to support Airbus, our customer, if indeed it does. But I would tell you that our plans, our 5-year plans, do not anticipate getting to that kind of rate by 2024 or 2025."

CUSTOMER DEMAND

Asked about the comments, Airbus Americas Chief Executive Jeff Knittel - a former leasing industry veteran - said: "Greg and I have had some very direct discussions about that and I would respectfully disagree at this point."

Speaking at a jet delivery, Knittel told CNBC: "Customers are asking us to bring airplanes forward, not push them out. To accommodate customers, to ensure that we have airplanes available, in our view ramping up is an important next step. The speed of that is the question, not whether we need to ramp up."

Raytheon Technologies owns Pratt & Whitney, one of two engine suppliers on the A320 family.

The head of one of the partners in the plane's other engine supplier, General Electric, backed "near-term" goals at Airbus and Boeing but declined comment on discussions being held behind closed doors on Airbus' long-term plans.

GE co-owns engine maker CFM with France's Safran.

In May, Airbus announced a firm target of increasing A320-family production to 64 a month by second-quarter 2023 and asked suppliers to enable a "scenario" of 70 by first-quarter 2024. It also said it was investigating rates as high as 75 by 2025.

On Monday, Airbus pushed back against criticism from leasing companies about the output plans.

"The key to all this is that we have these firm contracts with our client - we cannot say that we are not going to respect those contracts because we think they are too many for the business," said its Latin America head, Arturo Barreira. .

Airbus Chief Executive Guillaume Faury is expected to face questions from investors over the rift at earnings on Thursday. The company has said it is confident of a rebound in demand. (Reporting by Tim Hepher in Paris, Mike Stone in Washington, Additional reporting by Rajesh Kumar Singh in Chicago; editing by David Evans and Nick Macfie)


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AIRBUS SE -2.52% 98.55 Real-time Quote.9.77%
SAFRAN -3.41% 98.66 Real-time Quote.-11.91%
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Sales 2021 52 164 M 59 013 M 59 013 M
Net income 2021 3 308 M 3 742 M 3 742 M
Net cash 2021 6 134 M 6 939 M 6 939 M
P/E ratio 2021 23,2x
Yield 2021 1,15%
Capitalization 77 439 M 87 413 M 87 607 M
EV / Sales 2021 1,37x
EV / Sales 2022 1,15x
Nbr of Employees 125 888
Free-Float 74,1%
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Last Close Price 98,55 €
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Guillaume Faury Chief Executive Officer
Dominik Asam Chief Financial Officer
RenÚ Richard Obermann Chairman
Sabine Klauke Chief Technical Officer
Alberto Jose Gutierrez Moreno Chief Operating Officer
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