Airbus may be reducing the production rate of its A330neo according to sources familiar with the situation. The European plane manufacturer is dealing with multiple headwinds including the coronavirus outbreak and trade tensions. Reuters reports that, last month, the company said it was looking to deliver 40 A330neos this year, which is down from 53 in 2019.
Reduced demand from airlines
It’s already clear that global forces are having an impact on airlines. Now, those forces are rippling through to aircraft manufacturers too. In fact, Airbus received no new aircraft orders in February 2020. Even American manufacturer Boeing found itself in a similar situation the month before – the first month with zero orders in more than fifty years.
What’s more, some airlines are asking to defer the delivery of the jets they have already ordered. The most recent and notable example comes from budget airline AirAsia X. The long-haul budget carrier has said that it will defer delivery of 78 Airbus A330neo aircraft as it makes changes to its fleet to reduce costs. The ongoing impact of coronavirus was mentioned as a factor in forcing the airline to reconsider its growth plans.
An ongoing trade war
Airbus and Boeing have had an ongoing 16-year trade war, with each side accusing the other of unfair government subsidies. Earlier this year the United States announced that it would raise tariffs on aircraft imported from the EU, going from 10% up to 15%. According to Reuters, the US Trade Representative’s Office said it would be open to reaching a settlement with the EU on the issue.
With the United States being one of the world’s largest aviation markets, higher tariffs would disincentivize American carriers from purchasing Airbus aircraft. In fact, Delta is currently the only US carrier taking on new widebody Airbus aircraft. The other two major carriers, American and United, have opted for Boeing widebodies such as the 787.
What is Airbus doing to adapt?
As mentioned in the headline, Airbus could reduce the production rate of its A330neo line to ensure that there is a healthy backlog and enough demand into the future. When questioned about reports of A330neo production cuts, this is what an Airbus spokesperson had to say:
“Indeed, we are watching the situation carefully. But [it’s] too early to echo the speculations you have seen…”
The company adds that it has the ability to handle backloaded delivery challenges. This ability to adapt to fluctuating demand was demonstrated in December 2019. In the single month, it had outperformed, delivering 138 aircraft, including 8 A330neos.
Reuters says that the company is trying to tie A330neo sales to those of the smaller A321XLR aircraft. Details of what this means are unknown – but with discounts given for larger orders, it’s conceivable that the A330neo could be included at an attractive price should a customer be looking at the narrowbody, long-range A321XLR.
A recent press teleconference made the case from a marketing standpoint for why the two jets should be ordered together. The planemaker explained that the pairing would allow benefits in operational flexibility, but also fleet commonality.
It’s obviously a wise move for Airbus to be closely monitoring the situation and preparing itself to adapt as necessary. While the coronavirus situation seems to be improving in China, other parts of the world are still on high alert and it could be some time before ‘normalcy’ returns.
Do you think a production rate cut at this time is a smart move? Or should Airbus be more optimistic that the situation will improve soon? Let us know in the comments.