Airbus SE says it will take a year longer than planned to make the A220 jet business it bought from Bombardier Inc. a profitable operation, warning that the pace of recovery in the aviation industry is far from clear.
Airlines are making good use of the fuel efficient A220 single-aisle jet in the current crisis, senior executives for the European plane maker said in a conference call on Thursday to discuss fourth-quarter results. But the plane program remains a money-losing proposition from a manufacturing perspective.
Airbus needs to increase production rates for the aircraft to boost profit margins as it moves through the learning curve that comes with building an all-new jet. That won’t happen as quickly as planned because of work slowdowns and delivery adjustments related to the COVID-19 pandemic, Airbus finance chief Dominik Asam told analysts on the call.
The company, which is based in Toulouse, France, estimates that the profit picture for the A220 will not flip to the positive until the middle of this decade, about a year later than previous projections. The Quebec government owns 25 per cent of the A220 program, and Airbus owns 75 per cent. The airliner is built at factories in Mirabel, Que., and Mobile, Ala.
“It’s clear that the crisis is not over and that it will likely continue to be a reality throughout the year,” Airbus chief executive officer Guillaume Faury said on the call, adding that the spread of new variants of the coronavirus is offsetting progress on vaccination campaigns, while many governments are maintaining lockdowns and ordering tougher travel restrictions. “At the moment, the tipping point [for recovery] is quite uncertain. … It’s not developing as we were expecting.”
Mr. Faury is carrying out Airbus’s biggest-ever restructuring to try to position the company to face the volatility, an effort that includes cutting 15,000 jobs and shoring up liquidity. The company on Thursday scrapped its dividend for a second straight year and issued a cautious delivery forecast for the next 12 months, saying it would ship roughly the same number planes to customers in 2021 as it did in 2020, at 566 units.
Airbus is building four A220s per month, which will increase to five by the end of March. The company says the maximum monthly production rate for the plane is 14 units.
The A220 is the former C Series airliner developed by Bombardier at a cost of more than US$6-billion. Bombardier handed control of the program to Airbus for a nominal fee in 2018. Two years later, it cut ties to the business by pulling out of the joint venture with Airbus and Quebec that builds the plane.
Airlines and travellers have praised the A220, which seats 100 to 150 people, for its quiet operation, fuel efficiency and cabin features. But in the current environment, it also happens to be the right size for many operators. Roughly half the A220 fleet globally was still flying during the initial months of the pandemic last spring, while three airlines kept almost all their A220 planes operating, according to Airbus.
“One of the first things airlines have done is they’ve downgauged, where they’re trying to maintain frequencies but they’re flying smaller equipment,” Kevin Michaels of aviation consultancy Aerodynamic Advisory told a recent conference in Montreal. That has benefitted smaller jets like the A220, as well as Embraer’s E-Jet line, he said.
“I think on the other side of this crisis, there will be a structural change in the market where we will need fewer twin aisle [planes] and more single aisles,” Mr. Michaels said.
Together, Airbus and Bombardier have delivered 146 A220s, and Airbus has orders for 484 units in its backlog. Airbus employs about 4,000 people in Canada, mostly in Quebec.
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