For Airbus, Boeing, Supply Chains Limit More Rate Hikes

 - August 8, 2011, 9:10 AM
Airbus this spring decided to raise its A320 production rate to 42 a month starting in 2013, but supply-chain limits could thwart aspirations to go to 44. (Photo: Airbus)

Plans call for narrowbody production at both Airbus and Boeing to reach 42 a month by 2014, but the extent to which either company can extend its rates much beyond that level will depend on the supply chain more than the potential capacity at the airframers’ respective factories.

During his company’s second-quarter earnings call with securities analysts, EADS CEO Louis Gallois predicted that Airbus would sell more than 1,000 airplanes this year, following a banner Paris Air Show that raised the European manufacturer’s gross order tally to 777 for the year, consisting mainly of narrowbodies.

Meanwhile, Boeing’s backlog of more than 2,100 for the 737 represents more than seven years’ worth of deliveries, prompting the Chicago-based company to schedule increases from the current 31.5 a month to 38 a month in 2013, and again to 42 in the first half of 2014.

But while Gallois, for one, expressed confidence that Airbus could raise rates beyond those levels without the need to build another assembly hall, he also raised concern about the ability of Airbus’s suppliers–many of which it shares with Boeing–to keep pace.

“Airbus is looking at 44 [A320s] a month, but no decision has been taken because we have to make sure that the supply chain is following us,” said Gallois.

In fact, Gallois stressed that he sees “limited” execution risk related to the plan to build the A320 and A320neo families on the same assembly line, then gradually embark on a transition to A320neos over a three-year period.

“For the time being the bottleneck is not the assembly line; the bottleneck for increasing production is clearly the supply chain,” said Gallois. “Even [rate] forty-four is a question mark for our supply chain…We could create another supply chain, or increase the supply chain, but it is very difficult. It’s a very long process and for some items it’s not possible. Take the engines.”

GE, which partners on the CFM56 and Leap-X with France’s Snecma, plans to add another 1,000 jobs in the U.S. by 2014 to help keep pace with projected demand. The company has already added some 1,000 jobs over the past 18 months in Evandale, Ohio.

Rival engine-maker Pratt & Whitney, builder of the PW1000G Geared Turbofan, plans to add more than 800 jobs, including some 500 engineers solely to work on the GTF.