Exclusive: Airbus executive says jetmaker reaches new production 'sweet spot'

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PARIS (Reuters) – Airbus has reached a crucial jetliner production target and smoothed recent industrial problems as it embarks on a new phase in its response to the coronavirus crisis, the planemaker’s chief operating officer said.

Airbus recently announced output cuts of 33%-42% to limit damage as the pandemic grounded airlines around the world. First, however, it had to overcome the difficulty of producing planes at all as lockdowns spread across Europe.

“We have recovered from that phase and we are now dialled in at the new rates,” COO Michael Schoellhorn told Reuters.

The monthly rates – 40 A320/A321, 6 A350 and 2 A330, down from 60, 9.5 and 3.5 respectively before the crisis – are a “sweet spot that is not too disruptive to the whole supply chain…and puts us relatively close to where we feel the market will trend to,” he said.

Until the pandemic hit, Airbus’ problem was meeting demand for its hot-selling A321neo. But as that and other demand melted away in March, the company was forced to cut all output.

The result has been a production see-saw as Airbus first halted key plants, then started edging towards the new goals, which are higher than during the peak of the crisis but lower than the company and its suppliers originally invested for.

Suppliers are still lagging, however, with Airbus only needing parts for 25 jets a month as it soaks up surplus inventory from pre-crisis production levels, industry sources said.

Airbus has not ruled out cutting output again depending on the pace of recovery, but Schoellhorn said 40 a month is “still a place that we feel comfortable with”.

STABLE BASIS

The 55-year-old former military helicopter pilot and veteran of the Robert Bosch industrial group was brought in during a management shake-up last year to accelerate new production techniques as jetliner demand looked set to keep growing.

Instead, he found himself grappling with the industry’s worst crisis as undelivered jets spilled onto the tarmac.

Still, Schoellhorn said the crisis had given Airbus a chance to fix problems it could not easily address beforehand.

“I drive this home every day: now is the time to put all the issues to bed,” he said. “We are making good progress.”

Chief among these is a high-capacity version of the A321, the 240-seat A321ACF, which had suffered delays of at least 6 months before things began improving late last year.

“There are no systematic industrial problems as we speak,” Schoellhorn said of the plane. There are also “very few disruptions” among suppliers, he added.

Unions fear an imminent reorganisation involving thousands of phased job cuts and early retirements and are wary of a possible streamlining of the group’s 11 European plants.

Schoellhorn declined comment on a potential restructuring, but said the time taken to improve operations during the enforced downtime would create a “stable basis” for the future.

That future is one in which parts and information flow more freely, expanding ideas already imported from the car industry. Boeing (NYSE:BA) has also invested in data-driven manufacturing methods.

“There will be elements of the production system that will be very much like they are today…but we will see a higher degree of automation building on what we have implemented in recent years,” he said. “It will be more of a real-time flow”.

For now, automation investment has slowed as Airbus saves cash on most projects except its next single-aisle, the A321XLR.

Airbus wants to sustain the recently lowered production rates without losing cash, meaning cutting fixed costs has become a pressing priority.

“We are working on all angles,” Schoellhorn said. “It’s a challenge but also an opportunity.”