Airbus slows production ramp-up, cites virus hit to demand

Airbus SE slowed the pace of a planned ramp-up in jetliner production, after a global surge in coronavirus cases dealt a fresh blow to demand.

Output of the A320-series narrow-body, Airbus’s best-selling model, will now rise gradually to 45 per month through the fourth quarter, the European planemaker said Thursday in a statement. It had previously targeted a faster jump, to 47 monthly by July.

The decision marks a retreat from the optimism shown in October, when Airbus told suppliers to prepare for a sharp increase in narrow-body rates in the second half of 2021. Since then, fast-spreading variants of the virus have sent case counts soaring, despite the start of vaccine rollouts. Tightened borders have forced airlines to pull back on schedules, raising concerns that a hoped-for summer rebound in air travel will be delayed.

Sandy Morris, an analyst at Jefferies, said the impact on 2021 deliveries from the adjustment should be modest, while Rob Stallard at Vertical Research Partners said any increase in production was “an encouraging sign” in the circumstances.

Shares of Airbus traded 1.1% lower as of 9:13 a.m. in Paris Friday. The stock has lost 35% of its value in the past year.

Airbus now plans to produce 43 A320-series jets per month in the third quarter, up from the current 40, before the rate rises again in the final three months. The manufacturer will hold off on a potential increase for the A350 wide-body for this year. Output of the A220, Airbus’s smallest model, will rise by one to five per month from the end of March as planned.

Stallard said a slower ramp-up had expected and that even a modest increase A320 rates signals that Airbus sees strong demand for its flagship product. Freezing A350 output firm is not a surprise given the current market, he said.

Dark Turn

Faury said earlier this month that the new virus wave was creating uncertainty over the ramp-up, despite the roll-out of new vaccines that should bring down the number of cases. Airlines have been raising more funds to protect their balance sheets, as they brace for a longer downturn.

On Thursday, Dutch flag carrier KLM said it would cut up to 1,000 added jobs because the recovery from the pandemic is taking longer than expected.

Deutsche Lufthansa AG Chief Executive Officer Carsten Spohr painted a slightly more optimistic view of the industry’s prospects, saying vaccine programs should slow the virus spread and allow for traffic recovery in the second quarter.

Airbus delivered 566 aircraft last year, a third fewer than in 2019. While handovers of wide-body jets crumbled, demand for single-aisle planes slipped only 30%.

Airbus continues to expect the commercial aircraft market to return to pre-Covid levels by 2023 to 2025, it said in the statement.