Tim Hefer
(Reuters) – Airbus is incurring upfront costs as it prepares to ramp up aircraft production and plans a breather to absorb them once it hits its production target, the company’s chief financial officer said on Wednesday.
Airbus plans to increase production of its A320neo cash cow by about 50% to 75 aircraft per month by 2026.
But to break ground, the company had to invest in thousands of new workers and build two new assembly lines.
“We want to pre-hire so we can be ready to hit level 75 in 2026.” But, of course, costs are hitting us now, while full efficiency will only come in 2026, and potentially in 2027, when we will be at a stable level,” the CFO said. Officer Thomas Toepfer said this in an interview. Airbus is also building two new assembly lines.
Industry sources told Reuters such spending exceeded the civilian business’ budget for part of the first quarter.
Toepfer declined to comment on first-quarter activity but said the costs of “accelerating,” or increasing capacity, would pay off over time.
Airbus hired 13,000 people in 2023, including 10,000 new positions. “Why? Because we don’t want to create our own bottlenecks in supply conditions, which are challenging anyway,” Toepfer told Reuters.
Airbus confirmed the target of 75 months. “We are on track to achieve this goal,” Toepfer said.
REDUCED COSTS
For now, industry sources say Airbus is falling behind unpublished targets in its production plans. Toepfer declined to comment on current production but said strong deliveries in 2023 are a sign of progress being made.
Widening its lead over troubled Boeing (NYSE:), Airbus is increasing production to meet demand but said it would take its foot off the pedal once it reaches 75 a month, seen as an olive branch to suppliers worried about their own investments.
Toepfer said that’s when full effectiveness will begin.
“I think even when we get to 75, we won’t be at peak efficiency, but we’ll maintain that for a period of time to offset what I call the acceleration costs,” he said.
Spending to increase growth is expected to come under scrutiny when Airbus reports quarterly results on April 25.
Toepfer said supply chains were improving but Airbus would continue to put pressure on suppliers to invest.
“There is uncertainty so we shouldn’t overdo it, but we have to apply some pressure to get everyone moving. It’s a balancing act. We believe that there have been no fundamental changes compared to last year,” he said.
Toepfer said the company’s large order backlog is the best guarantee that production can avoid the yo-yo effect that some are predicting.