Airbus Brass Sees Clearing Skies Following Upbeat Dubai

 - November 30, 2009, 10:34 AM

Although Airbus CEO Thomas Enders “certainly didn’t come [to the Dubai Airshow] with expectations of a miracle,” the German executive sounded a rather upbeat tone during the company’s main press conference in which he and Airbus COO for customers John Leahy issued an overview of the company’s performance this year and prospects for 2010.

“The Middle East is still the hub of aviation growth,” said Enders. “The show sends a strong signal of recovery, and Dubai is the leading place in the sector.”

Enders also trumpeted the company’s expected delivery rates for this year, projections for which point to another record after last year’s all-time high of 483. “The delivery centers are very active these days,” he noted. Sales remain somewhat behind the pace Airbus needs to meet its projection of 300 it delivered in January, said Enders, but, he added, “if we end up with between 200 and 300 new orders this year, it would not be a catastrophe.”

Leahy, meanwhile, drove home Airbus’s point that the Middle East will require airplanes as large as the A380 to accommodate a projected doubling of traffic growth over the next 15 years. Worldwide, some 10,000 passengers travel every day to 37 “mega-cities,” said Leahy. In 20 years, he added, the number of cities on that list will rise to 82, making the case for the A380 all the more compelling, particularly in a place such as Dubai, which, said Leahy, would rank as the world’s fourth largest hub for the superjumbo.

“Thirty-six percent of the world’s population lives within 2,500 nautical miles of here,” said Leahy. Within a 10-hour flight, he added, resides 86 percent of the world’s population, representing two thirds of its GDP. “That’s the reason the Middle East is growing,” said Leahy. “People don’t realize how close the Middle East is to connecting the rest of the world.”

Leahy proceeded to emphasize that Airbus does not carry too much backlog exposure in the Middle East, as some have suggested. In fact, he said, only 18 percent of Airbus’s backlog resides there, and a large portion of that with leasing companies that do business with airlines all around the world. “If anything, I would like to increase our exposure to the Middle East,” said Leahy.

Turning to the well documented disruptions to A380 deliveries, Enders acknowledged that various circumstances haven’t turned in Airbus’s favor this year, but that he expected “the next step” would yield a production rate of two aircraft per month. “We have said numerous times that production of the A380s is not at a steady state,” he said. “It’s not really where we’d like it to be. Yes, we’ve made progress…with the ramping up, but we have some production hiccups as I said the other day.

“The other thing is we’ve had a difficult year so far. I mean there have been customers that were quite nervous, particularly in the first part of the year, whether this would be a good time to receive A380s in their fleets and there have been discussions [about] stretching out deliveries. Plus, certain production issues we had to cope with, well, that amounted to, let’s call it disruptions in the 380 program.”

Enders concluded with a confirmation that “a few” of the final 13 A380s due for delivery this year might not go to their intended operators next month, but rather in January. He also wouldn’t rule out cutting production of the A320 line from its current rate of 34 per month in the second half of next year.

That prospect looks all the more likely now that US Airways has officially declared its intention to defer delivery of 46 A320s for as long as three years. Originally expected to take 62 of the single-aisle airplanes between 2010 and 2012, it now plans to take just 26. Airbus later downplayed the significance of the deferrals to its production plans, however, noting that negotiations with US Airways have gone on for some time and that it already considered the deferrals in its planning for next year.