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Airbus and Boeing signal production rate changes as billions in first half losses announced
July 31st 2020
Airbus and Boeing have both announced changes to production rates as weak demand due to the coronavirus pandemic left airlines with less need for new capacity. Read More »
The revised schedules were disclosed this week during the release of the latest financial results of the two manufacturers.
Airbus said, in its calendar 2020 first half results, that production of its A350 family would be reduced to five aircraft a month in response to current market conditions.
It is the second time the A350 production rate has been lowered in 2020, following an announcement in April that output of the type would be cut to six a month from 10.
"COVID-19 triggered an unexpected and unprecedented situation for the aerospace industry," Airbus CEO, Guillaume Faury, said during the company's financial results conference call.
"We believe we have defined the right calibration point that fits with the understanding we have today about the new environment."
Faury said airlines remained in a difficult situation, with Airbus forecasting air traffic would not return to 2019 levels until sometime between 2023 and 2025.
"They have been reviewing their fleet planning. We have been working closely with them to find mutually acceptable agreements and to align a new delivery profile airline by airline that gives visibility to the customers and to us by defining a new way forward," Faury said.
The Airbus CEO said the narrow-body segment was likely to recovery sooner than the wide-body market, hence the additional adjustment to the A350 production rate.
Airbus said the A220 final assembly line (FAL) at Mirabel, Canada, was expected to progressively return to pre-COVID-19 levels at four aircraft a month and a new FAL at Mobile, Alabama had opened as planned in May.
At June 30, Airbus said about 145 commercial aircraft could not be delivered due to COVID-19.
Airbus’s business units - commercial aircraft, helicopters and defence and space - reported a net loss of 1.9 billion euros (US$2.3 billion) for the six months to June 30, 2020, a collapse into the red from a net profit of 1.2 billion euros in the prior corresponding period. Revenue tumbled 39%, to 18.9 billion euros, as aircraft and helicopter deliveries fell away.
In the first half of calendar 2020, Airbus's Asia-Pacific revenue fell 62%, to 4.1 billion euros, from 10.8 billion euros 12 months earlier.
The region generated the largest share of revenue in 2019, but slipped to second place in 2020, behind Europe.
Faury said it was Airbus's "ambition to not consume cash before M&A and customer financing" in the second half of calendar 2020.
Rival Boeing this week announced its first half results. The conglomerate reported a net loss of US$3 billion for the six months to June 30, from a net loss of US$793 million in the prior corresponding period. Revenue fell 26%, to US$28.7 billion.
"Given the amount of uncertainty that is still in front of us, managing liquidity continues to be vital to our industry's ability to bridge to recovery and to navigate the challenges," Boeing president and CEO, David Calhoun, said during the company's interim results conference call.
Boeing said the production rate on the 787 program would be cut to six aircraft a month in 2021, from a pre-COVID-19 rate of 12 a month and 10 a month currently.
Calhoun said this rate change would lead to a review of where the 787 would be assembled.
"Given the lower rate profile, we will prudently evaluate the most efficient way to produce the 787 to include studying the feasibility of consolidating our 787 production into one location," Calhoun said.
There are two 787 FAL: Everett just outside Seattle in Washington State and North Charleston in South Carolina.
Calhoun said first delivery of the in-development 777-9X would be pushed back to 2022, from a previous target of 2021. The production rate was being cut due to market uncertainties driven by the impact of COVID-19 and the delay in the 777-9X first delivery.
The 777/777-X production rate would be "gradually reduced" to two aircraft a month in 2021, from five aircraft a month currently. The company also confirmed production of the 747-8 would end in 2022.
"We currently estimate it will take around three years for travel to return to 2019 levels," Calhoun said. "And it will be a few years beyond that for the industry to return to long-term growth trends."
On the 737MAX, Boeing said it was expecting to have the necessary regulatory approvals to be obtained in time to support the resumption of deliveries during the fourth quarter of calendar 2020.
The U.S. Federal Aviation Administration (FAA) is evaluating design changes to the aircraft's systems to recertify the aircraft, which has been grounded since March last year following two fatal accidents that killed 346 people.
