Airbus Says A330 'More Challenging', Supply Base Stable

[May 03, 2014]  By Tim Hepher
 
 PARIS (Reuters) - Airbus warned on Friday it faces increased challenges in managing the order book for its A330 wide-body jet beyond 2016, highlighting the stakes involved as the European planemaker considers an engine revamp for its most profitable long-distance jet.

In its annual report, parent Airbus Group <AIR.PA>, also said supplies of cabin equipment would need to be carefully managed as the industry meets strong demand for Airbus and rival Boeing jets, but said the overall supply base was "more stable".

Airbus and Boeing <BA.N> have both been selling large quantities of jetliners and increasing production to meet demand from emerging markets, despite the global economic malaise.

Until now, the 20-year-old A330 has had a particularly strong run as sales benefited from three years of delays to the Boeing's <BA.N> new 787 Dreamliner.

But that is winding down as Boeing catches up with 787 deliveries and Airbus prepares to bring out its own new A350.

A record rate at which Airbus is making the planes to take advantage of the market gap has also eaten into the backlog.

Confirming a timeline reported by Reuters earlier this year,

Airbus said it faced growing challenges beyond 2016.

"The long-range program (A330) presents no new challenges. However, managing the order book beyond 2016 becomes more challenging due to competition from A350 XWB and Boeing 787," the document said.

Industry sources warned in February the A330 faced a steep drop in deliveries beyond 2016 without new sales.

A spokesman for Airbus, the commercial planemaking unit of Airbus Group, said the A330 remained well supported.

"The market understands that we are investing in the A330 family, offering two new variants optimized for longer range and for regional operations, available as early as 2015," he said.

A decision on whether to go ahead with a third and more costly enhancement involving new engines is expected in the second half of the year, and there has been limited speculation that it could come as early as July's Farnborough Airshow.

Airbus's longevity plan for the A330 is designed to keep alive a key source of cash for other programs and to keep pressure on the 787 as long as possible, industry experts say.

Boeing executives argue the older A330 has had it day and cannot compete with the lightweight 787 Dreamliner.

Airbus officials say the economics still make sense due the older A330's pricing, availability and reliability.

A recent visit to Europe by Chinese President Xi Jinping failed to produce the expected breakthrough in sales of the new regional offering, but Airbus is expected to renew its efforts when German Chancellor Angela Merkel visits Beijing in July.

In its defense business, Airbus Group's report said the United Arab Emirates had decided to cancel a contract for command and control systems being developed by Emiraje Systems, a local venture in which Airbus Group has a 49 percent stake.

The first phase of the contract was said to be worth $550 million when it was announced in 2011. Airbus did not give a reason for the move, saying settlement talks were underway. Airbus declined further comment.

(Reporting by Tim Hepher; Editing by James Regan and Ingrid Melander)

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