Airbus weighs A330 output cut after largest buyer seeks deferral
Airbus is considering a cut in production of its A330neo jet after the biggest customer for the wide-body said a coronavirus-driven slump in travel had forced it to defer deliveries, according to people familiar with the matter.
The European planemaker is reviewing its production plans and may make a decision as soon as this month, the people said, asking not to be identified because the deliberations are private. In a filing last month, AirAsia X, the long haul unit of Malaysian low-cost carrier Air Asia Group, which represents about one-fourth of outstanding orders for the model, said it would postpone deliveries of its new A330neos.
The prospect of a reduction, coming on the heels of a recent cutback in A330 annual output to 40 jets, illustrates just how quickly the damage from the travel slowdown is rippling through the aerospace industry. The epicenter is in China, where flights have fallen by as much as 80% and forced a government takeover of HNA Group.
An Airbus spokesman declined to comment on its plans. Chief Executive Officer Guillaume Faury told French senators Wednesday that Airbus expects an "even tougher" year on long-haul routes.
AirAsia X, one of the largest foreign airlines operating in China, said in late February that the market represents 30% of its capacity, and it expects "major headwinds" from the outbreak during the first half of this year. The company said it may switch to single-aisle planes on thinner routes to better line up with demand.
AirAsiaX will also seek to return some older planes to lessors early, it said in a Feb. 27 filing. "Routes within a six-hour radius from our Kuala Lumpur hub will then be replaced with A321 aircraft when the market recovers."
The market for wide-bodies was already soft when the coronavirus first started to upend travel earlier this year. In February, Airbus scaled back output plans for A330 aircraft by about 25% this year from 53 in 2019. It also said it would hold production of the larger A350 at 9 or 10 per month. U.S. rival Boeing Co. said in late January that it planned to reduce production of its 787 Dreamliner to 10 a month in early 2021 from a planned rate of 12 this year.
A thin backlog for the A330neo makes a potential pullback especially tricky for a model that hasn't sold particularly well. AirAsia X had 76 on order out of a total of 292 for Airbus, based on the planemaker's January order and delivery data. Iran Air has orders for 28 of the aircraft, frozen since U.S. President Donald Trump reimposed sanctions in 2018, along with 16 A350 orders.
While wide-bodies generate more profit per aircraft, airlines are switching to smaller and more-fuel efficient single-aisle aircraft that can go long distances. Toulouse, France-based Airbus has seen demand for its A320 family of narrow-body aircraft soar, especially for larger and longer-range variants.
For Chicago-based Boeing, the 787 Dreamliner has provided a stable source of cash flow over the past year, while its 737 Max has been grounded. It produced 14 a month during 2019.
Carriers across the world have pared flights and grounded jets following the spread of the coronavirus beyond China, and are bracing to see how demand holds up during the coming Easter holiday season. Deutsche Lufthansa AG, Ryanair Holdings Plc and British Airways-parent IAG SA, have cut capacity as companies reduce business travel and flyers chose to stay home.
"It's too early to say if there will be a ripple effect onto the industrial side of this industry," Airbus commercial chief Christian Scherer said Tuesday at an event in Brussels. "History tells us that the resilience is there. With SARS, for example, within eight months we were experiencing traffic that was higher than when it started."
