Abu Dhabi, UAEWednesday 17 July 2019

Airbus says it must slash A350 costs to win wide-body price war

Chief operating officer is leading a study for the plane maker to increase production efficiency and remain competitive

An Airbus A350-1000 performs at the 53rd International Paris Air Show on Wednesday. Photo: Reuters
An Airbus A350-1000 performs at the 53rd International Paris Air Show on Wednesday. Photo: Reuters

Airbus is looking to cut manufacturing costs for wide-body jets including its latest A350 model as competition with Boeing forces down prices and weighs on margins.

A review of the company’s jetliner plants is geared towards identifying inefficiencies and legacy industrial quirks, said Michael Schollhorn, the chief operating officer at the commercial-plane arm, who is leading the study.

“We are in a price war on the wide-bodies, so we need to work on cost, especially on the A350,” Mr Schollhorn said on Wednesday at the Paris Air Show. “We are pretty complex, sometimes too complex.” The study, concerns the whole industrial footprint, though that should not be seen as indicating factory closures, he said.

Airbus, formed through an amalgamation of European plane makers in 1970, has made increased efficiency a top priority under chief executive Guillaume Faury. The structure was formalised in 2000 and Airbus, based in Toulouse, France, now builds aircraft at final-assembly plants in half a dozen countries, with significant operations elsewhere.

That compares with three major plants in two American states at arch-rival Boeing, maker of the hot-selling 787 Dreamliner.

Mr Schollhorn, who joined on February 1 from German auto-parts and appliance specialist Bosch, said it is premature to speak in terms of factory closures, and that there are other ways to optimise processes.

There need to be “adaptations” at some plants, Mr Schollhorn said. The chief concern, he added, is to keep up with the demands of ramping up single-aisle plane output with a production system that was designed decades ago to build 700 planes in total but is now churning out that number every year.

The focus is on Airbus’s core locations in France, Germany, Spain and the UK, but the company needs to take into account its plants in the US and China, Mr Schollhorn said. In the case of China there are offset requirement considerations and questions surrounding how much production should be based there.

The split of work has long been a juggling act for Airbus, given the French and German states are both major shareholders. A plant in Hamburg, for example, delivers the double-decker A380 to clients in Europe and the Middle East, while Toulouse hands the plane over to buyers from other regions.

Mr Schollhorn said Airbus will take those sensitivities on board, while making the case for changes that are required to ensure that the company is still competitive in 50 years and that employment in Europe is sustainable. “Everything needs to be done in a responsible, balanced manner because founding states still have a vested interest,” he said.

Airbus has said UK-based wing construction could be jeopardised by the country’s planned split from the European Union, though it has no comparable facilities elsewhere and a shift would require significant investment.

“Whatever Brexit brings, we don’t know, it’s speculative at this time. But if it were to be prohibitive we would look at new investments for a new programme and make up our minds,” Mr Schollhorn said.

Updated: June 20, 2019 11:43 AM

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