Airbus Struggles With its Success

By Robert Wall 

HAMBURG, GERMANY--Low oil prices are injecting a note of caution into Airbus Group SE production plans, at a time the European plane maker already is struggling to deliver more aircraft.

Airbus plans to build 60 A320 single-aisle planes a month in 2019, up from the mid-40s currently, after years of record orders for the model swelled the backlog for the plane. Airbus has studied boosting output even further, but Tom Williams, chief operating officer for customers said "with the fuel price where it is, that is a more challenging sell."

Higher fuel costs several years ago swelled orders for Airbus's newest single-aisle plane, dubbed the A320neo, which offers 15% greater efficiency. But at lower fuel costs, airlines are shying away from paying the premium for the more efficient, but also more expensive plane.

The impact on demand from current fuel prices needs to be monitored before a decision is made on whether to hike production further, Mr. Williams said, particularly given the capital investment the company would have to make and the strain such a move could place on suppliers.

Airbus is already grappling with meeting its goals of building more planes. After a slow start to jetliner deliveries in what Airbus has billed as a critical year in its plan to boost output, executives for the European plane maker Monday said they would catch up and achieve a new production record by year-end.

Meeting the full-year target is "a very large challenge," Mr. Williams said.

Delivering the promised 650 planes this year will likely go down to the wire, Airbus officials said. Only 177 planes were delivered in the first four months of the year. Airbus and suppliers are still struggling with production of both the new A350 long-range plane and shipments of the A320neo amid engine delays.

Airbus has many of A320neo planes already built sitting idle awaiting engines from United Technologies Corp.'s Pratt & Whitney unit to power the aircraft. "We've been building gliders," Mr. Williams quipped.

Pratt & Whitney deliveries have been hampered, in part, by the need to introduce engine upgrades to address early technical problems. Pratt & Whitney has previously said it was progressing with building engines for the A320neo plane.

Mr. Williams said Pratt & Whitney has struggled with several issues, which has upset customers. The variety of issues has been a concern, Mr. Williams said, and that Airbus would retain focus on the engine supplier to ensure targets are met.

Mr. Williams said the required engines are now starting to appear and that, once they arrive, the pace of deliveries can pick up quickly. Mr. Williams expressed "confidence" that deliveries would recover, though Airbus plans to accelerate delivery of older A320 models to avoid any shortfall.

The A320neo also comes with a second supplier option, built by a joint venture of General Electric Co. and France's Safran SA. Safety authorities are about to sign off on the plane, Airbus said.

Another headache for the company is meeting its goal of delivering at least 50 A350 long-range jets, with only nine have been shipped so far this year. "The very beginning of the year has been really disrupted by the lack of cabin equipment," said Didier Evrard, executive vice president for programs. Airbus has had to add resources to bring the program back in line, he said.

Suppliers haven't been the only program. Airbus also struggled with some components arriving at the final assembly facility in Toulouse not fully completed, Mr. Williams said. While progress has been made, he acknowledged more work needed to be done.

"The target remains absolutely achievable but it will come with a very high level of effort," Mr. Evrard said, though company officials concede it could be a race to the finish line.

Airbus has been considering raising future production of the A350 beyond the target of 10 of the long-range plans a month at the end of 2018. For now the company is holding off, though, as it focuses on overcoming near-term production challenges.

Mr. Williams said production of the first A350-1000, a larger model than the one currently in service, was also progressing well. The airplane is due to fly for the first time around September, he said.

Write to Robert Wall at [e-mail]

(END) Dow Jones Newswires

May 30, 2016 07:35 ET (11:35 GMT)

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