Airbus has informed suppliers to prepare for a ramp-up in A320 production next year, with the company set to increase its production rate from 40 to 47 jets a month. Airbus has told suppliers to be ready by July 2021 as it anticipates a strong recovery for the industry.
Despite the major slump in demand from airlines laboring under the current economic climate, Airbus will boost production of its A320-family aircraft by 18%. The latest move is a sign of encouragement to an industry that has had little to celebrate this year.
The latest from Airbus
According to Reuters, Airbus has asked suppliers to prepare for a conditional 18% boost in production. This would take production from its current rate of 40 planes a month up to 47. While no firm decision has been made on scheduling, the company has penciled in a July 2021 date. A spokesman for Airbus stated,
“For the A320 family, we plan to maintain ‘rate 40’ until summer next year and we have asked the supply chain to protect ‘rate 47’ to be prepared for when the market recovers.”
Airbus was already planning to ramp-up A320 production before the coronavirus pandemic, with a backlog of orders stretching into 2025. However, the planemaker was forced to slash its production rate of A320’s by a third in April as it responded to the coronavirus crisis. The latest news is a move towards re-establishing its pre-COVID rates of production, which for the A320 stood at 60 planes per month.
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A challenge for suppliers
Ramping up production of such sophisticated aircraft in the present economy will be a challenge for Airbus and its many supply-chain partners.
The A320 manufacturing process involves four facilities in Germany, France, China, and the United States, with parts moving between facilities. In a Financial Times article, one supplier noted the inherent difficulty for supply partners,
“If the rate were to be increased it would be difficult to take it down again. Suppliers were stretched for cash and working capital due to the impact of the virus and asking them to invest more could not be done lightly.”
Suppliers could end up shouldering a lot of the risk should a recovery not materialize. Airbus is shooting for a July 2021 date under current plans but has not set anything in stone. The same supply partner commented,
“They want to be able to do this and want suppliers to put working capital in without giving them guaranteed orders. There will be no economic cost to them, if it goes wrong.”
Reasons for optimism
Just a few months ago, Airbus looked to be in hot water, with several airlines canceling aircraft orders and demand grinding to a halt. Between April and June, the manufacturer received just eight orders for new commercial aircraft.
However, in September, the planemaker delivered 57 planes, the most this year, and recently celebrated delivering its 10,000th A320-family plane. While the company still plans to cut up to 15,000 staff to trim costs, the latest announcement shows there is still room for optimism.
Is this a smart move by Airbus, or a major gamble? Let us know your thoughts in the comments.