After more than a year of calls for cutting production of narrowbody aircraft, Airbus and Boeing are headed in the opposite direction. Airbus announced Tuesday that it will increase rates on A320 starting in December, going from 34 to 36 aircraft per month and Boeing Commercial Airplanes CEO, Jim Albaugh, says that a decision will be made in April and this summer on 777 and 737 rates, respectively.
In a business that is inherently cyclical, Boeing has reliably dropped narrowbody rates every 10 years ±1 year, the recession of 2009 has broken that trend. Boeing and Airbus have maintained that responsible management of the backlog is a the root of the production stability and backfilling delivery spots with downstream customers was the way to stave off any cuts.
Though, what about a different way to look at it? For both Airbus and Boeing, the profit-margin narrowbody products (A320, 737) which have been paid off for years are currently paying for low/no/negative-margin programs (A380, 787). Based on that logic, along with the availability of financing from EXIM and ECA that keeps aircraft flowing out of the US and Europe, the rates are kept high to sustain operations across each company.
No one disputes that the cycle, which hit bottom last year, will recover, but just how much? Have the painful deep cuts been fully avoided? Is the cycle officially broken on narrowbody production? Or have Boeing and Airbus just deferred what could be a bigger fall later created by the bursting of a narrowbody bubble due to over-supply of aircraft?
This post was originally published to the internet between 2007 and 2012. Links, images, and embedded media from that era may no longer function as intended.
This post originally appeared at Flightglobal.com from 2007 to 2012.