Airbus narrowbody production could rise to 60 a month

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Airbus may have to raise production rates on its A320 family line to as many as 60 aircraft a month in the second half of the decade if more major orders flood in.

With the airframer having broken Boeing's stranglehold at American Airlines - an exclusivity agreement that stood for 15 years - industry sources briefed on Airbus's North America strategy suggest it is the opening salvo of a battle for future deals with the other US majors.

With American requiring 260 new Airbus narrowbodies, starting in 2013, Airbus chief executive Tom Enders said he is looking to increase production even beyond the figure of 42 that will be achieved in late 2012.

Enders added that this could rise even higher than 44 a month, currently the subject of feasibility studies by the airframer.

"If somebody had suggested a year ago, two years ago, that we seriously think about rate 50 a month, I would have said 'go away, you're out of your mind'.

"I think everybody realises that there's a huge demand for fuel-efficient, single-aisle aircraft in the second half of this decade and beyond. It's not about overcapacity, it's largely about replacement," he said.

Boeing's own forecast points to more than 3,500 narrowbody aircraft being required for replacement of North American fleets between 2011 and 2030.

Industry analyst consensus, as well as prevailing wisdom inside Boeing, concludes the European airframer cannot achieve 60 A320s a month without major expansion of its Toulouse, Hamburg or Tianjin, China lines.

This would open the door to a US-based final assembly line in Mobile, Alabama, current site of an Airbus engineering centre, late in the decade to meet the replacement demand in North America.

Its other lines could then concentrate on meeting growth in the rest of the world.

Each year, Airbus buys components worth $10 billion from US suppliers, making it the largest non-US customer for aeronautic and aerospace products.

It is a figure Enders intends to grow, along with Airbus's industrial footprint in North America.

Boeing thwarted near-term plans for an Airbus beachhead in Mobile with its win on the US Air Force KC-X tanker contract.

Airbus parent company EADS had promised to conduct final assembly of its KC-45A in the US, alongside assembly of A330 freighters, if the company won the contract.

While the move was blunted by the Boeing victory, gaining market traction with US legacy carriers and their steep replacement demands may well see A320s built on US soil, providing Airbus has access to non-euro-based production costs in line with the aims of its Vision 2020 strategy.

In the near-term, its plans assumed at least a partial win with American Airlines, which was more than achieved, delivering A321neos to replace the ageing fleet of 757s, which serve as the backbone of the carrier's fleet.

It also requires a supply chain that can handle the record production rates.

Key to the Airbus sales strategy is how it views the market and the commoditisation of narrowbody travel in the US. Consumers would select travel based on the fare alone.

Wielding a near 25% improvement in seat-mile costs, according to an AirInsight report comparing the A321neo and 757, American Airlines would gain a significant upper hand in crowded and price-sensitive markets.

The result Airbus is banking on is that American's legacy US competitors - Delta Air Lines, United Airlines and US Airways - all follow suit with major orders to secure delivery positions to replace their own ageing fleets of 737 Classics, MD-80s and 757s with A320neos.

Airbus was aiming to capitalise on Boeing's perceived indecisiveness on the future of the 737.

However, those familiar with the European airframer's thinking say that if a re-engined 737, available mid-decade, was offered to American Airlines, it may stave off a mass exodus of customers to the A320neo.

A split buy, say industry watchers, allows American to force Boeing and Airbus to compete on an airframe-by-airframe basis and to trade margins for marketshare.

It is what Vasu Raja, American's managing director for corporate planning, alluded to as the "flexibility" built into the agreement with both airframers.