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Airbus slashes A380 superjumbo production

Airbus slashes A380 superjumbo production

DOHA: Airbus said it will almost halve production of its slow-selling A380 superjumbo, casting further doubt over the program’s future, while warning that engine glitches are still weighing on deliveries of the single-aisle A320 that’s due to become its largest-volume model.

The A380 build rate will be reduced to eight jets a year in 2019, down from 15 this year and 28 in 2016, Airbus said Wednesday.

While the company aims to eke out the backlog in anticipation of revived demand as airports get busier, it said the handful of ongoing contract negotiations may not produce sales.

“Even if we should get another order before the end of the year that will not change the needle on our rate decision, except if we would get an unexpectedly high order, Chief Executive Officer Tom Enders told reporters. As the A380 struggles for survival, Airbus faces a host of issues with other models that it’s relying on for future earnings.

The revamped A320neo version of the narrow-body workhorse is a major concern, Enders said, with fixes developed by engine supplier Pratt & Whitney proving unreliable, while talks are continuing with Qatar Airways after it canceled four planes citing quality issues and delays.

In contrast to Airbus, Boeing is already reaping the benefits of record industry backlogs as it ramps up output. Free cash flow surged to US$4.51 billion in the second quarter, the Chicago-based company said Wednesday, allowing it to reward investors with US$3.4 billion in stock buybacks and dividends. The stock jumped, 10 percent, the largest gain since October 2008.

The A380 was already due to see production cut to one aircraft a month from next May, and the reductions mean that it is no longer breaking even on a per-plane basis. The company has long since given up on recouping the program’s €25 billion in development costs.

Airbus last month offered an enhanced version of the A380 featuring fuel-saving winglets, which combined with an already-announced layout revision accommodating 80 more people would shave 13 percent from per-seat costs.

Dubai-based Emirates, the leading superjumbo buyer, is exploring the upgrade with a view to buying 20 planes, though Tim Clark, its president, had wanted a more significant upgrade featuring new engines.

Airbus stood by its full-year forecast for a mid-single-digit percentage gain in earnings, free cash flow matching the 1.4 billion euros achieved in 2016, and 700 jetliner deliveries, though Enders said that depends on engine suppliers “meeting their commitments.”

The issues with Pratt’s geared turbofan mean that delivering the close to 200 A320neos targeted of which just under half are powered by the United Technologies division has become “more challenging,” Airbus said. It handed over 59 Neos in the first six months.