Airbus’ decision to up production seems overly optimistic: IATA warns

By Sayujya S, Desk Reporter
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The airline industry’s most senior representative cast doubt on plans by Airbus, the European Aerospace Company, for sharp increases in jetliner production, saying they appeared overly optimistic.

Willie Walsh, director general of the International Air Transport Association (IATA), voiced skepticism a day after Airbus published proposals to almost double single-aisle production to as high as 75 jets a month by 2025.

Willie Walsh
Willie Walsh
Director General – IATA

“Let’s wait and see, because obviously there is a huge disconnect between what the manufacturers say they’re going to produce and what the airlines decide to buy. So, you know that they’re in the business of selling. I don’t see that there’s going to be a requirement for whatever it is they’re producing.”

Geneva-based IATA has no day-to-day role in aircraft negotiations, but for years Mr. Walsh was among the most influential buyers as the former head of British Airways and then its parent group IAG. Meanwhile, Airbus Chief Executive Guillaume Faury defended the increases saying that pent-up demand for flights on medium-haul jets was “very strong.”

Investors pushed up shares in the world’s largest plane maker by almost 10 percent after the announcement, followed by another 1.2 percent on 28th May.

Meeting pent up demand

Both Airbus and US rival Boeing sell jets years before they are built and have several years of output on order.

Besides meeting new demand, raising production would allow Airbus to burn through a number of deliveries scheduled for the middle of the decade after airlines asked for delays during the COVID-19 pandemic. Schedules in that period are now so clogged that Airbus has little left to sell until 2027. Raising rates also warns airlines to take what is already on order, analysts and industry sources said.

Skepticism

Critics of the steep output plans cite uncertainties over demand and the health of airline and supplier finances. Leasing companies also routinely argue against higher production to protect the value of existing fleets.

“Whether Airbus gets to 75 a month depends on traffic growth and aircraft retirement rates over the next four years, and that’s still very tough to call,” said analysts. “The last thing Airbus wants, though, is to be stuck as they were in 2018 or 2019 with airlines wanting more new planes and Airbus being unable to satisfy the demand.”

Airbus met official delivery targets in those years, but in 2019 it fell about 80 jets short of internal targets owing to industrial snags and tight supply chains, industry sources say.

Related: Airbus fixes higher jet production targets as aviation recovers


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