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Airbus A380 Slowdown, Brexit Concerns Weigh on U.K. Engineer GKN

  • Impact of reduced superjumbo output felt earlier than expected
  • Company would follow planemaker if it shifted wing production

Airbus SE’s superjumbo production cuts are starting to affect suppliers, with GKN Plc saying the slow-selling A380 is weighing on revenue, highlighting the intertwined nature of the aviation industry as the U.K. engineer considers following the planemaker should it move plants abroad after Brexit.

The impact of Airbus’s plan to slow output of the double-decker A380 is being felt sooner than expected, GKN said Wednesday, with revenue from the program set to slump about 45 percent this year and the slide accelerating, according to Kevin Cummings, who runs the Redditch, England-based group’s aerospace arm.

“We’re seeing quite a ramp-down right now,” Cummings said on an analyst call. The A380 slowdown has combined with lower demand for Boeing Co.’s 777 ahead of the introduction of an upgraded version to offset gains from higher production of the Airbus A350 wide-body and single-aisle A320neo, GKN said.

After delivering 28 A380s in 2016, Airbus is paring output as it moves to a rate of one plane a month from 2018. The manufacturer has said it will cut production further in the absence of new orders this year and a rate of 0.7 jets a month is being considered, people familiar with the discussions have said.

Cummings said he expects that Airbus will drop to “just below” one A380 per months “and try to maintain that as long as they can before they get a new customer base with a more efficient aircraft.”

Brexit Demands

GKN is “optimistic” that Airbus will keep wing production and design in the U.K. after the split from the European Union and that the British government will heed the planemaker’s concerns regarding its ability to move people between plants and aerospace remaining exempt from import duties, Cummings said.

“In the unfortunate outcome that they don’t and somehow they fold more into Europe, we are also just as much European as we are a U.K. company, so we would obviously have to move our emphasis to where our customers are,” the executive said.

GKN reported a 14 percent gain in first-half pretax profit to 393 million pounds ($512 million), spurred by work on the Boeing Co. F/A-18 Super Hornet and Lockheed Martin Corp. F-35 Lightning II fighter programs, a strong performance at the automotive arm and the beneficial impact of currency changes. Commercial aircraft revenue fell 3 percent.

Shares of GKN traded 0.1 percent lower at 326.40 pence as of 10:54 a.m. in London and are 1.6 percent lower for the year, valuing the company at 5.61 billion pounds.

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