Airbus & Boeing: What to build and when as crisis looms?

The aerospace manufacturing industry is a crisis like no other. Right now both Airbus and Boeing are piling up aircraft that nobody wants to take delivery of. In an ideal world, based solely on demand from the airlines, they would be better off shutting down and starting up in eight to ten months time.

The fact is, simply stopping production is just not really feasible. If Airbus or Boeing were 100% in charge of their supply chain and there weren’t a myriad of suppliers all around the world, utterly dependent on what they deliver to the two aerospace giants it might be easier.

Boeing is said to be sitting on 50 787’s and nobody wants to take delivery. Each month they’re building more – and they’re the ones paying for them to be built with zero income.

The MAX is due to fly by the start of next year most likely, and production while in a hiatus at present is going to restart by the winter.

The 777-9 is in super-slow build, along with the 777F and the final aircraft for the UPS 748F order.

Airbus and Boeing were both pressing massive production rate expansion onto all of their respective suppliers as they sped up the production of aircraft like the A320 family heading on for 60 a month.

Vast investment from reluctant suppliers – afraid of a major turn down in demand in the next 2-3 years as recessionary fears grew more pronounced and the economic cycles slowed, had every single fear justified. Yet not one of them imagined they would crash at such speed into a concrete wall this big.

Even relatively tiny Embraer, whose competitors in the guise of Bombardier and Mitsubishi have basically vanished, one for good, the other nobody knows when they’ll ever start to build them, is facing the prospect not of building far more E2’s but far fewer, far less often than it ever imagined. It’s not been a huge sales success in the first place.

For Embraer, the Chinese and Russian Governments, determined to keep their own domestic regional production going, force their airlines to buy aircraft Embraer could potentially have sold them.

Airbus, which was building 60 A320’s a month, had planned to push that up to 63 by 2021 and as high as 68 by 2024-25. Its production cut at 40% of its planned volume was determined to be the most it could get away with – without destroying its industrial base and supply chain. The problem is that it’s producing now, far more than anyone wants, but any less risks producing anything at all.

Airbus saw a substantial recovery in deliveries during June compared to May. The level is still far below pre-covid, or current production rates. The company delivered 36 aircraft during the month, 31 of which were A320neo-family. The other five were one A220-300 to Air Canada and four A350-900s; two to Iberia and one each to SAS Scandinavian Airlines and Air France. But there were just 24 deliveries in May, so June represents a 50% increase.

Airbus has accepted that it will have no choice but to produce substantially more aircraft than it delivers until the end of 2021, with huge financial costs to keep the business viable.

Boeing has a similar problem, and the pair of them will have a huge backlog of deliveries when the market starts to pick up. Airlines may even try to renegotiate the terms of the deliveries, facing the manufacturers with yet more risk and financial burden.

Airbus, far more than Boeing is very much aware of its people and their skills. realistically it could and should loose some 45-50,000 staff, but it knows that getting them back, their skills and their good will, gone, will cost a fortune and take years. It doesn’t want to be in that position when the crisis tide turns.

Politics and Franco-German bailouts and investment in future technology are also another reason vast job losses are a no-go.

Embraer was well and truly shafted by Boeing dropping the deal to take over its commercial arm. New IT and business systems had been developed, new offices were literally about to be moved into, the company had in effect been split up. Now it’s all got to be undone. Embraer is also having to shelve long term development on the smaller E-175-E2 to save money, and there will not be a new turboprop for the foreseeable future.

Boeing meanwhile seems lost at sea. The 777-9 and 737MAX are both bound up in the FAA and certification process. Nobody wants to talk about any potential issues with the 777-9, and its strongly believed there are some, as the same leadership and processes that approved the MAX had a lot to do with the 777-X project. Boeing and the FAA are keeping very tight lipped on that subject, as well they might. That none will be delivered until 2022 at the earliest suits pretty much everyone.

The end of the 747-8 programme is certain, the 777F is strong but demand is minimal, the 787 family will rise again, but has to find a sustainable level. Operating two production facilities seems highly unwise – yet pressure to keep them both for the same reason Airbus have, in terms of skills and supplier certainty, remain strong.