Airbus May Open Assembly Line in U.S. to Lift Local Appeal

(Updates with EADS chief comment in 10th paragraph.)

Jan. 17 (Bloomberg) -- Airbus SAS, whose parent lost out in a U.S. tender to supply refueling aircraft to Boeing Co., may add a final assembly line in the U.S. to buoy sales in the world’s No. 1 market for single-aisle planes, an executive said.

The European planemaker, which has final assembly lines in Toulouse, France, and Hamburg, Germany, as well as Tianjin, China, may find that adding a similar operation in the U.S. increases visibility with potential clients, Hans Peter Ring, chief financial officer of Airbus parent European Aeronautic, Defence & Space Co., said today in an interview.

While the Asia Pacific region is the most promising market for future sales of large, wide-body planes, North America is the single-biggest market for short- to medium-haul ones such as Airbus’s A320. With North American carriers needing to replace thousands of aircraft in coming years, the European planemaker could have a commercial advantage in showing customers that its models are put together locally.

“The U.S. market is for the foreseeable future the biggest single-aisle market in the world, so there is some logic to be in the U.S.,” said Ring after EADS and Airbus officials gave briefings in Hamburg on the business outlook for 2012. “It’s certainly something that new management will need to look at.”

EADS Chief Executive Officer Louis Gallois is retiring in May after the annual shareholder meeting and is expected to be succeeded by Tom Enders, now chief of Airbus. EADS shareholders Daimler AG and Lagardere SCA have held off on final decisions about the shape of future management.

“I have to tell you there is no decision at all,” Ring said. He declined to comment on the specifics of the management succession or whether he expected to retain his position as CFO of EADS.

U.S. Inroads

Airbus last year broke Boeing’s two-decade stranglehold on supplying AMR Corp.’s American Airlines, with an order for its A320neo, a single-aisle plane offering more fuel-efficient engines. It lost out in a contest with Boeing to supply Delta Air Lines Inc. and is currently competing against Boeing to win an order from UAL Corp.’s United Airlines. United is looking at the purchase of as many as 200 jets.

North America is “critical” for the sale of single-aisle planes, Airbus CEO Enders said today. Airbus had hoped to use the sale of refueling tankers as a beachhead to build a commercial aircraft assembly line in Mobile, Alabama, though it lost the tanker contract to Boeing.

“Just look at the global market forecast figures: more than 80 percent of all deliveries forecast until 2020 in North America are single aisles. And for the next 20 years, America in terms of the number of aircraft delivered will still be ahead of China,” said Enders.

Production Plans

EADS’s Gallois today told journalists that Eurocopter, the parent company’s helicopter division, recently broke ground on a new plant in Mexico and the CEO said that “other initiatives” could follow. Such moves would not hurt jobs in Europe, he said.

Airbus has been building production toward the rate of 42 single-aisle planes a month by the end of this year. The company had aimed to make a decision on whether to push that to 44 a month, though has held off, Enders said, as it studies whether the supply chain can handle the extra burden.

“The supply chain ramp-up isn’t a walk in the park,” Enders said today. “That’ll be a huge challenge to our people in 2012 as well.”

Airbus has an extensive network of suppliers in the U.S., though that offers less visibility than a site piecing together components and rolling planes out onto the runway, Ring said. It’s not completely clear whether having an assembly line in the U.S. would actually help win customers, as it clearly does in China. The difference in China is that the government is a shareholder in the airlines, he said.

“The question is, and I think it has no answer, ‘Would you sell more airplanes?’ Ring said.

source: http://www.businessweek.com/news/2012-01-25/airbus-may-open-assembly-line-in-u-s-to-lift-local-appeal.html