Airbus Holds Off Production Boost to Study Suppliers

Airbus SAS, the world’s biggest planemaker, will hold off from deciding whether to further increase production of its workhorse A320 series to verify whether component suppliers can keep pace.

“It’s the supply chain,” Chief Operating Officer John Leahy told journalists today at a briefing in Paris. “We’re very conservative.”

Chief Executive Officer Tom Enders is conducting more studies into Airbus’s parts providers before making a decision, Leahy said.

Enders said in January that the Toulouse, France-based planemaker, a unit of European Aeronautic, Defence & Space Co., was studying moves to boost production of single-aisle planes. Airbus said earlier in February that monthly output of the widebody A330 would increase to 10 aircraft from eight, without addressing the A320, which competes with Boeing Co.’s 737s.

Airbus took more than a year to study its engineering resources before deciding whether to commit to offering an updated version of its A320 with new engines. Leahy said today the same conservative approach is being used to examine whether major suppliers of components have the capacity to increase production to keep pace with Airbus.

The monthly production rate on A320s and other planes in the series will increase to 40 from 36 by 2012.

Pending Boeing Decision

Success in selling single-aisle jets is critical for Airbus and rival Boeing as they derive most of their earnings from those planes. Airbus late last year pledged to offer new engines on the A320 starting in 2016, putting pressure on Chicago-based Boeing to consider the future of its best-selling model, the 737. Boeing has yet to decide whether to develop a new plane or offer one with new engines.

Leahy predicted today that Boeing will wait a year or more to decide, and continue to talk about building an all-new single-aisle aircraft before ultimately offering new engines on the 737. That would mirror the decision-making process over the modernization of its 737 in the early 1990s.

“I would suggest that’s exactly what’s going to happen again,” Leahy said. “After about one year, maybe two of talking about an all-new airplane,” Boeing will simply offer new engines on its 737 starting in about 2020, he said.

CSeries

Leahy said the business case for Bombardier Inc.’s CSeries, due in 2013, would no longer stand up now that Airbus is offering airlines new engines on the A320, including the Pratt & Whitney geared turbofan that will power the CSeries.

If Bombardier doesn’t win a good crop of orders over the next year, he predicted, the Montreal-based manufacturer might not stick with the program.

“The Bombardier CSeries is real and it’s a game changer on so many levels,” John Arnone, a Bombardier spokesman, said in response to Leahy’s remarks. “CSeries is an optimized solution in a market space that has no real competitive response apart from older and heavier aircraft.”

Bombardier has said its goal is to tap the 100- to 150-seat segment of the narrow-body market, which is the lower end of the passenger-capacity range on Boeing and Airbus models.

Boeing on Feb. 10 reiterated that it prefers the development of a new narrow-body jet in about 2020 to an upgrade of its 737 model, even with Airbus offering new engines.

“I feel pretty comfortable that we can defend our customer base,” Boeing CEO Jim McNerney said Feb. 10 at a Cowen & Co. conference in New York.

The existing Airbus A320 had a list price of $81.4 million in 2010, and Airbus has said the upgraded version would cost $6 million more. The company predicted a market potential of as many as 4,000 aircraft over 15 years.

To contact the reporter on this story: Andrea Rothman in Paris at aerothman@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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