In a flashy ceremony more Hollywood than Deep South, Airbus on 2 July confirmed plans to install its first direct manufacturing facility on US soil with a final assembly line (FAL) for the A320 opening in 2015 in Mobile, Alabama.

As Lynyrd Skynyrd's "Sweet Home Alabama" jangled inevitably over the public address system of the Mobile Convention Center, Airbus chief executive Fabrice Brégier signed the paperwork committing the European airframer to a $600 million investment in a major facility located squarely in Boeing's back yard.

A 2,000-strong crowd of joyous Mobile residents looked on, visibly surprising Brégier by rising to their feet repeatedly for standing ovations during his brief remarks.

"I just wanted to tell you that I'm even more convinced that the we took the right decision," Brégier said, opening a press conference immediately after the ceremony. "I'm very confident that this whole community supporting us is key for the future of Airbus."

To some analysts, the 116-acre site at the Brookley Aeroplex, which already hosts an Airbus engineering centre, reveals more about Airbus's economic future than Mobile's.

In a competition with Boeing where price is increasingly key, the new factory in Mobile gives Airbus a relatively low-cost manufacturing centre to target a US market expected to generate thousands of orders for narrowbody aircraft over the next 20 years.

"Right now this is much more of a flex thing. When the world is turning better we will be heading up towards the 50s in terms of monthly [A320] production rates," says aerospace analyst Sandy Morris at Jeffries International. "It makes perfect sense to be where your customers are."

Just as Boeing opened a 787 final assembly centre in South Carolina - a state which is a philosophical cousin of Alabama with its anti-trade union views - Airbus is increasing production capacity where labour costs are lowest.

"You've got to give credit to the guys at Airbus," says Michel Merluzeau, an aerospace analyst who founded G2 Solutions, a Seattle-based consultancy. "Boeing is going to find it harder to compete [with Airbus] on price."

The benefits of a low-cost manufacturing base on US soil may extend not only to Airbus's commercial business.

EADS North America (NA) still has a goal to generate annual revenues of $10 billion by 2020, and the military market remains a strategic target for that plan. In 2008, a bid by Northrop Grumman and EADS NA was selected by the US Air Force to build a fleet of 179 tankers only for this to be overturned after a Boeing protest. EADS lost the subsequent competition, but has not given up on the US military market.

In the near-term, of course, the reason for the Airbus factory in Mobile is less complicated.

"Its proximity to a very, very large market and international footprint for the company," explains Christian Scherer, head of Airbus strategy. "Sorry, it's as simple as that."

It is the fourth FAL opened to support inexorably rising A320 production rates, but the Mobile site carries with it the ambition to strike at Boeing's manufacturing and political fortress. Indeed, Boeing pre-empted Airbus's planned announcement three days earlier, referencing its ongoing trade dispute over illegal subsidies.

"No matter how many [jobs] are created [by the Airbus FAL], the numbers pale in comparison to the thousands of US jobs destroyed by illegal subsidies," Boeing said.

Brégier reacts to Boeing's critique with a philosophical observation - and a challenge to his competitor.

"I would say that if they are worried it is the right decision for Airbus because we are competing against them," he says, adding, "and they would be very welcome to invest in an assembly line in Europe. Please, Boeing, do it." Airbus expects the FAL in Mobile at a peak production rate of four aircraft per month after 2016. The plan should generate about 1,000 local Airbus jobs, as well as thousands of supporting positions.

Goodrich, for example, is likely to build a facility to integrate the A320's engines with the pods that fit into the nacelle under the wing, says David Hess, chief executive of Pratt & Whitney, a unit of United Technologies which is acquiring Goodrich.

The Airbus plan calls for transitioning to a strictly local workforce very soon after production starts.

That strategy follows the pattern of the Airbus A320 FAL opened in Tianjin, China, but stands apart from secondary assembly centres opened by sister companies, such as Eurocopter.

In 2005, EADS North American won a contract to supply more than 300 EC145s to the US Army, but the full statement of work was not transferred to a US factory in Columbus, Mississippi until after the delivery of the 100th aircraft. Instead, Eurocopter transferred the assembly work from Germany in stages.

For the new A320 FAL in Mobile, that transition must happen far more quickly. European staff will be seconded to Mobile during the first one or two years of production, but will then leave as the local workforce takes over, Brégier says.

"For us, it's a little different [than Eurocopter]. We don't have a process which will manage to go step by step," says Brégier, who was CEO of Eurocopter when the US Army contract was awarded. "We need to deliver an aircraft [in Mobile that is] as good as in Europe from the very beginning, so this is the way we will proceed."

Airbus has sized the final assembly line in Mobile, Alabama, to deliver four A320s per month at peak rates after 2016, but has the option to almost double the site's capacity.

Construction will begin next year on the 116-acre site at the Brookley Aeroplex located on Mobile Bay, a deepwater harbour that opens to the Gulf of Mexico.

The final assembly centre will ramp up production quickly to between three and four aircraft per month in 2017, and maintain a peak rate of four aircraft per month depending on demand.

Brookley Aeroplex officials also have agreed to reserve additional space around the factory, Scherer says. The additional space also could be used to move other production services related to the A320 to Mobile.

"We don't have definite plans for doing that yet," Scherer adds. But "it is quite conceivable we could have support facilities or the facilities of an ancillary industry."

Airbus is launching the new final assembly line on US soil amidst a historic rise in narrowbody orders, including a 1,425 unit backlog for the A320neo which enters service in late 2015 with launch customer Virgin America.

Meanwhile, the Airbus supply chain already is "struggling" to increase monthly production at the three existing A320 final assembly lines - Toulouse, Hamburg and Tianjin - to a combined 42 aircraft per month by 1 October, Brégier says.

The difficulty is "for the simple reason when you look at the production increase [at] Airbus and other manufacturers this is quite a big step for the supply chain", he says.

After Airbus stabilises peak rates at 42 aircraft month, the company would consider taking production even higher. Adding the Mobile factory mathematically allows Airbus to increase production total production capacity to 46 per month by 2017, and perhaps even 50 per month afterward. But Airbus officials declined to make any specific commitments.

"We know if we can deliver much more than 42 aircraft per month from 2017 to 2018 onwards and we would be able to do it," Brégier says. "It's premature to say we would ramp up above 42, but there is a huge potential."

For some analysts, Mobile's potential impact on Airbus' future is more that can be measured in monthly production rates. Morris notes the closer proximity of the Mobile site to the Canadian and Brazilian airframers Bombardier and Embraer. Although the pair compete in the class of aircraft just below the 150-seaters of Airbus and Boeing, he sees the two regional aircraft manufacturers as potential risk-sharing partners for the longer-term A320 or 737 replacements.

"It's a fairly sensible move on a three- to four-year view, but personally I see this as a bit of a dance ahead of the main game," Morris says. "You feel that those four [Airbus, Boeing, Bombardier and Embraer] will end up closer together on some aircraft as they sort out their future [narrowbody] strategies."

Additional reporting by Dominic Perry

Source: Air Transport Intelligence news