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Monday, June 1, 2015

Airbus COO Outlines ‘Stable Duopoly’ With Boeing

Woodrow Bellamy III 

[Avionics Today 06-01-2015] John Leahy, chief operating officer - customers (COO) at Airbus, used the French airframe manufacturer's Innovation Days 2015 to provide several program updates and an outlook on the future of the industry regarding where demand for new airplanes will come from and what kind of airplanes will be in demand over the next two decades. Among the topics Leahy and other Airbus executives discussed during the event are the possibility of pushing A320 production to more than 60 aircraft per month by 2018, a reduction in A330 production, the future A380 demand, and a shift in the majority of demand to emerging markets. 
Airbus COO John Leahy noted during the annual Innovation Days event that there is projected demand for 200 A380neos from Emirates. Photo: Airbus.
Airbus is currently preparing to transition from legacy A320ceo production to A320neo production at a current rate of 42 aircraft per month combined from production factories located in Europe and China. The first U.S.-based factory will start production later this year, with the first U.S.-built A320 scheduled for delivery by the second quarter of 2016. By 2017, Airbus expects A320 production to reach 50 units per month, although Leahy stressed that he favors studying the possibility of increasing that to more than 60 per month due to the current record backlog of 6,399 aircraft. 
"I am looking for a rate over 60," said Leahy, noting that Airbus has already publicly committed to producing 50 A320s per month by 2017. "All we have to do is keep the backlog level, which means if I book as many airplanes per year as I deliver, and the backlog stays level, then we’re justifying a rate above 60 on the single aisle program. We’re studying it internally, we have to make sure that our supply chain can do it, but I am highly confident that, as long as we have a stable supply chain, the market can justify that rate. One of the reasons is that the market has been expanding a little bit."
The market has definitely expanded beyond concentrated demand from U.S. and European operators, which Leahy noted accounted for more than 60 percent of demand for new Airbus and Boeing aircraft 10 years ago in 2005. In 2015, that number has effectively shifted, with emerging regions in Asia, the Middle East and Latin America accounting for 58 percent of demand, while the remaining 42 percent is in the U.S. and Europe. 
"This is clearly the decade of the developing markets, primarily Asia, the Middle East, Latin America and, going forward another 10 years, I think you’ll see a lot of growth in Africa as well," said Leahy. 
The Airbus executive also sees tremendous growth opportunities in India, where the company has a training center and large engineering center manufacturing airframe components. Although he also acknowledged that the country features a lack of infrastructure and regulatory issues similar to those mentioned in last week's African Business Aviation Association (AfBAA) report about the aviation industry in Africa.
Leahy characterized the current state of the airliner manufacturing industry as a "stable duopoly" between Airbus and Boeing, while also making a decent case for healthy demand over the next two decades for larger airframes such as the A380 to support projected growth in air traffic. 
"Every independent forecaster is saying that, going forward, every 15 years air traffic is going to double," said Leahy. "How are we going to do that? Double the number of aircraft movements? Impossible. That percentage is going to shift more and more to bigger aircraft — bigger aircraft like the A380."

While there is demand for the A380, there is not yet enough demand for a re-engined super jumbo jet from Airbus. Even though Leahy noted that there is projected demand from Emirates alone for 200 A380neos, Airbus is not currently in a position to commit to launching that program. 

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