Airbus Pumps Out Record Number of Jets, Joins Boeing in Production Scramble -- 2nd Update

By Robert Wall

Boeing Co. and Airbus SE both built more jets last year than ever, but not enough to lessen their backlogs and ease supply-line strain as orders boom.

Airbus said Monday it built 718 planes in 2017-- a company record and a full 30 planes above the year before. Boeing said last week it produced 763 airliners, also a record.

The delivery frenzy has been a boon to both planemakers, lifting profit and share prices. But it also has strained manufacturing and supply lines around the world. Investors have punished companies--both plane makers and their suppliers--amid any sign of operational hiccups. The tightness has spurred consolidation both in the U.S. and abroad.

Airbus and Boeing have already struggled at times to get planes out the door because of a lack of seats, toilet doors, and even engines.

Airbus said it fell short of its target of building at least 200 A320neo planes last year because of lingering engine supply issues. The A320neo is the latest version of Airbus' best-selling narrowbody, or single-aisle, jet. It and Boeing's latest 737s have become the workhorses of both legacy and budget carriers because of their size, fuel savings and versatility. Airbus had 30 planes waiting for engines at year end, Fabrice Brégier, the company's chief operating officer, told reporters Monday.

The engine-supply issues are easing, but Mr. Brégier said Airbus won't commit to higher output of the plane until it has monitored supplier reliability for several more months.

Boeing and Airbus ended the year with a combined backlog of 13,129 planes, or almost nine years of production at current output levels. To cope, both planemakers have promised to build even more planes this year--further stretching factories around the world that are already running at full tilt.

"The market is just strong everywhere," said Airbus sales chief John Leahy, who retires this month. Global economic growth is robust, total passenger numbers are rising, and planes are packed, he said. Airbus plans to produce close to 800 airliners this year, said Mr. Brégier.

Airbus booked 1,109 net orders in 2017. A year ago, Airbus projected order intake would slump below the number of planes delivered, eating into its backlog for the first time since 2009. Instead, the boom period has continued and Airbus's backlog surged to 7,265 planes valued at $1.1 trillion before discounts.

There is one, big exception to the sales boom: the world's biggest planes. Mr. Leahy, in his most explicit comments yet about the fate of Airbus' A380 super jumbo jet, said the company would have no choice but to shutter the program if it didn't eventually win a fresh order from Emirates Airline, which is balking. Boeing, meanwhile, has said it might stop making its iconic 747, its biggest plane, amid dwindling sales.

The sales boom--and questions over deliverability--come amid a period of uncertainty at Airbus. In addition to Mr. Leahy, Mr. Brégier also is departing the firm. Chief Executive Tom Enders will leave next year.

The company also is grappling with accusations of corporate wrongdoing, including corruption allegations and the unauthorized use of middlemen to win sales, in several jurisdictions including the U.S. Airbus has said it is cooperating with the probes.

The production boom comes as both Airbus and Boeing have pursued big, industry-changing tie-ups that have pointed them both in the direction of making and selling smaller planes.

Airbus agreed to take control of a new joint venture with Canada's Bombardier Inc. to build and market the Canadian firm's CSeries single-aisle jet. Boeing, meanwhile, is in talks with Brazilian regional jet maker Embraer SA about a partnership. Airbus hopes to close the Bombardier deal this year. Boeing is still in talks to convince with the Brazilian government to back its tie-up with Embraer.

Suppliers also are consolidating to gain scale and become more financially resilient to afford the investments in production capacity Airbus and Boeing require. United Technologies last year agreed to acquire aircraft equipment maker Rockwell Collins Inc. Rockwell in April closed a $6 billion acquisition of cabin interior specialist B/E Aerospace Inc. French supplier Safran SA is expected to soon close its purchase of seat maker Zodiac Aerospace SA.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

January 15, 2018 11:05 ET (16:05 GMT)

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