Airbus Expects Orders to Drop Below Deliveries
Airbus expects orders to dip below deliveries in 2009 for the first time in six years as airlines curb spending amid the economic crisis, the planemaker's head said Thursday.
Another key challenge will be renegotiating the contract for the A400M military transport plane with the seven NATO nations that order it because Airbus wasn't ready for the complexity of a military order.
CEO Tom Enders called the current setup "a recipe for disaster" and said it would be "irresponsible to continue." Besides delays to the A400M program, Airbus is having trouble ramping up production of its flagship A380 superjumbo.
Airbus will fall short of its delivery goal for the superjumbo in 2009, Enders said, predicting 18 A380s will be handed over to customers. It had already downgraded its target to 21 from the 25 originally planned.
Airbus' customers are struggling with slowing air traffic and difficulties raising credit to pay for new jets, causing some airlines to ground planes, cut capacity and delay or even cancel orders.
Airbus has installed a "weekly watchtower" to monitor the situation, identifying which airline customers may be in trouble and readying teams to adjust the production tempo if necessary, Enders said.
Airbus, which is in the midst of a restructuring program dubbed Power-8 that aims to shed 10,000 jobs by 2010, has no need for further layoffs for the moment, he said.
Rival Boeing said last week it plans to cut about 3 percent of its work force, or around 4,500 jobs, as a weakening global economy lowers demand for jetliners.
In 2009, Enders said he expects deliveries to be similar to 2008, when Airbus handed over 483 jets -- 30 more than the previous year.
The deliveries tally he announced Thursday beats Boeing's full-year score of 375 and allows Airbus to keep its title as the world's biggest planemaker.
The U.S. jet maker's results were hurt by an eight-week machinists strike. Airbus also beat Boeing on orders last year. It booked 777 net orders valued at $100 billion at catalog prices compared with 662 for Boeing. Airbus's total included 472 single-aisle A320s and nine A380s.
"My estimation is that we will get less new orders in 2009 than we will deliver aircraft," Enders told reporters in Toulouse, southwest France, where Airbus is headquartered. "I would be quite content if this year we reach a delivery level of the same order of magnitude than in 2008."
With the flagship A380, the planemaker has met with glitches in passing to new serial production techniques, Enders said. For example, when a length of wire is measured in the digital mock-up, the program fails to account for the real-life gravity effects.
Airbus finally delivered the first superjumbo in late 2007 after a series of technical problems and management errors led to almost two years of delay. The company said Thursday that Air Austral, based on the Indian Ocean island of La Reunion, has signed a memorandum of understanding for two A380s in an economy class configuration.
Meanwhile, Airbus is struggling to manage delays to the A400M program, which have already cost the planemaker euro1.7 billion ($1.84 billion) in penalties and other charges and led to a public spat with engine suppliers.
There is debate over whether parent company EADS should pay new penalties to governments, but for the moment the defense group is refusing to speculate on the financial impact.
Airbus Military and parent company European Aeronautic Defence & Space say they underestimated the technical complexity of the program and are unable to meet their commitments to customers. The commercial contracts were not suited for military orders, Enders said.
They have proposed a "new approach" to the seven European NATO countries that ordered the plane in 2003 through procurement agency OCCAR. They want to discuss the program schedule and changes on items such as technical characteristics.
"We want to continue the program but we want to continue in a way that ensures success," Enders said. "Within the current contractual and organizational setup we will not get there."
He said Airbus was "stupid" to accept this contract in the first place, and if it were proposed to Boeing Co.'s military division "they would run away crying."