Airbus To Cut The A350’s Rate Of Production As Demand Falls

As Airbus announces a €1.226 billion ($1.44 bn) loss today, the planemaker has again cut the production rate of its A350 widebody. Following in the footsteps of Boeing with its own production cut announcements yesterday, Airbus will now only generate five of the flagship planes per month.

Boeing 777X vs A350
The flagship A350 will only be produced at five per month. Photo: Airbus

A further cut for the A350

Amid a worse-than-expected loss, Airbus has confirmed a further rate cut for its flagship widebody, the A350. Having reduced the output rate in April from 9.5 per month to just six, the planemaker is now looking to trim the rate further to just five jets per month. In the report issued today, Airbus said,

“Commercial aircraft are now being produced at rates in accordance with the new production plan announced in April 2020, in response to the COVID-19 situation. The current market situation has led to a slight adjustment in the A350 rate from 6 to 5 aircraft a month for now.”

This follows from Boeing’s reports yesterday, which detailed a cut in output rates for the 787 and 777 aircraft. Boeing also said it was pushing back the launch of the 777X to a year later than planned as a result of the global downturn in travel demand.

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The widebody market has been the hardest hit by the crisis and is likely to continue to struggle for some years. Yesterday, IATA predicted it would be 2024 before we see traffic returning to similar levels as 2019, which is likely to impact on the planemakers’ orders and deliveries.

Aeroflot Airbus A350
The widebody market is likely to take the longest to recover. Photo: Getty Images

A loss worse than expected

Airbus’ results posting for the second quarter of the year included an adjusted loss of €1.226 billion ($1.44 bn). This was larger than analysts had been predicting, having forecast a loss of some €1.027 billion for the period.

Revenue was down more than expected, too, coming in at €8.317 billion ($9.76 bn), a 55% drop from the same period last year. This was, again, worse than predicted, with forecasts suggesting revenues of as much as €8.552 billion ($10.04 bn).

Airbus Mobile factory
Airbus will produce 40% fewer aircraft than planned this year. Photo: Getty Images

Although the company has, like so many others, suspended formal forecasts going forward as a result of the volatility of the current situation, it did warn that further hits to its profits could be felt. It estimated a further impact of €1.2 to €1.6 billion as a result of the restructuring the company is currently undergoing.

In a statement accompanying the release, Airbus Chief Executive Officer Guillaume Faury admitted the challenges facing the planemaker but said he believed it was in a good position to survive. He said,

“The impact of the COVID-19 pandemic on our financials is now very visible in the second quarter, with H1 commercial aircraft deliveries halving compared to a year ago. We have calibrated the business to face the new market environment on an industrial basis and the supply chain is now working in line with the new plan.

“It is our ambition to not consume cash before M&A and customer financing in H2 2020. We face a difficult situation with uncertainty ahead, but with the decisions we have taken, we believe we are adequately positioned to navigate these challenging times in our industry.”

Although the planemaker has a long way to go, its report of a gross cash position of €17.5 billion is a positive sign. In the current environment, cash is king, and having a healthy bank balance is the best position in which to be.