Airbus, Boeing Mull Further Output Rises

November 26, 2010

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Airbus and Boeing have started sounding out suppliers on their ability to cope with further increases in production of their most popular jets, taking combined output well above 80 a month within four to five years.

Three senior industry sources said consultations had started on a historic upswing which could see Airbus producing 44 A320 single-aisle planes by 2014 or 2015 and Boeing rising to 42 737s a month.

Despite a sluggish US economy and a debt crisis in Europe, demand for narrow-body jets is increasing as banks and leasing agencies bet on aviation and Asian airlines expand to tap rapid growth.

"Going to 42 or 44 is something people are being asked about. It is a discussion we are having," said an executive at a supplier to both leading plane makers.

Another said Airbus and Boeing were exploring whether to create new production slots for such models, which are sold out until 2015. The aim is to catch hold of a stronger-than-expected recovery and gain the flexibility to counter new competition.

However, the increase in demand for existing models complicates the jigsaw for Airbus as it ponders plans to upgrade the A320 family with new engines. A decision to go ahead with the carefully balanced market gamble is expected by year-end.

Boeing and Airbus suffered a slump in orders in 2008 and 2009 amid the recession. Now, demand is resuming as air traffic recovers and funds flow back into the leasing market.

Airbus is about to increase output of A320-family jets to 36 and has targeted a record 40 planes a month in 2012.

Boeing said in September it would boost 737 production to 38 a month in the second quarter of 2013.

Both plane makers declined to comment on contacts with suppliers or discuss any plans beyond those already announced.

DUOPOLY CHALLENGED

"We are at rate 34 (a month) now, rate 36 next month, rate 38 in August 2011 to reach rate 40 in early 2012. From this plateau we will study our options, market and resources permitting," Airbus spokesman Stefan Schaffrath said.

Boeing's Jim Proulx said: "We regularly review our production rates to gauge what rates would best serve the needs of our customers, help us respond to the continued high demand for the Next Generation 737, and also be sustainable by Boeing and non-Boeing suppliers."

"That said, we don't comment on any discussions we might have with suppliers," he added.

Supplier talks are at a preliminary stage, according to the sources, but they give a glimpse of the weight placed by both plane makers on the least publicised but most cash-generating part of their portfolios.

Narrow-body planes carrying up to 200 passengers about 3,000 miles (5,700 km) are the workhorses of the airline industry.

Airbus and Boeing have a colossal backlog of about 4,400 narrow-body planes worth a total USD$350 billion at list prices.

Demand for such planes is seen as an economic bellwether in emerging markets where transport expands early to fuel growth.

But the aircraft giants are seeing their duopoly challenged as Canada's Bombardier expands from regional and business jets to offer the new 110-145-seat 'C Series'.

China last week announced initial orders for its first viable passenger jet, the 150-seat C919, which it hopes to deliver in 2016 but which most analysts expect nearer to 2020.

(Reuters)