Airbus is aiming to boost production of its popular A320neo family of single-aisle aircraft by close to 18 per cent from the second half of next year in a rare piece of good news for an industry that has been devastated by the impact of the coronavirus crisis.

The European aircraft maker has asked suppliers to be ready to ramp up production of the world’s most popular aircraft from 40 to 47 a month from July, three people with knowledge of the situation said. 

The move comes as its US rival Boeing prepares for a return of the 737 Max single aisle to the skies after nearly 18 months on the ground following two fatal crashes. Regulators are in the final stages of recertifying the aircraft. 

It also comes barely six months after Airbus chief executive Guillaume Faury slashed production of its popular A320 single-aisle jet by a third from 60 a month in order to ensure the company’s survival amid a collapse in demand from cash-strapped airline customers. Boeing followed soon after with similar cuts in production.

Both companies have also scaled back their workforces to prepare for several years of depressed demand. Airbus’s 15,000 job cuts represented the biggest single reduction in its passenger jet business since its foundation 20 years ago. Boeing this month slashed its expectations for global passenger jet demand over the next decade by 11 per cent.

But Airbus’s aim to lift production indicates that there are encouraging signs, even amid the gloom.

“We have done a re-evaluation of the situation after the summer period,” Airbus said. “We have refined the plan for the A320 Family programmes based on our current view of the market.”

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The company was keen to stress that no final decision had been taken. “It is a preparation to increase when certain conditions are met,” Airbus added. “We have asked the supply chain to protect up to rate 47 to be prepared for when the market recovers. This decision aims to provide some visibility to our supply chain.”

Airbus’s about-turn on rates comes far earlier than many suppliers had expected. While narrow-body aircraft, generally used for domestic or regional flights, are expected to recover more quickly than wide-bodies, fears had been growing that the prospects of recovery were lengthening.

The resurgence of coronavirus in many countries has forced airlines around the world to cut capacity significantly this autumn and winter. Many in the industry had speculated that Airbus and Boeing would be forced to cut rates again, rather than increase them.

Nevertheless, Airbus this month announced it had delivered 57 aircraft in September — the highest this year. In recent days, the company has told suppliers it is confident it will be able to sell aircraft at an even higher rate of production. 

“This is good news,” said one supplier. “It is very good news for the industry if this happens.”

However, some are wary of Airbus’s bullishness. The supply chain will have to produce “hundreds of millions of dollars worth of extra inventory” to meet the new rate, said another supplier.

“If they are assuming that by next summer they will be getting some recovery, I think that’s great news,” he added. “But a degree of cynicism is correct. 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.”

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Another person warned that 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, he said.

Via Financial Times