Building on a strong upturn in global airline traffic, Airbus is ramping up production of all its models–A320 family, A330 and A380–while keeping a careful eye on possible supply chain issues that could hit increased output rates for these models and also for the new A350 XWB widebody. Meanwhile, costs and an uncompetitive euro-dollar exchange continue to give headaches to the European airframer’s top management. “In [airline] traffic, after minus four percent in 2009, we are now experiencing a seven- to eight-percent growth, and a five-percent growth is almost guaranteed,” Airbus COO Fabrice Brégier emphasized in an early June meeting with the French aerospace journalist association (AJPAE). This explains the increased production rates for the fast-selling A320 single-aisle family, for which output will increase from 36 to 42 aircraft per month. This year, a first target is 38 but early next year the rate should reach 40 and it is expected to hit 42 in the fourth quarter. Production is spread among Toulouse (a steady 14 aircraft per month); Tianjin, China (increasing from 3 to 4 per month); and Hamburg, Germany, which is to reach 24 per month and is thus accommodating most of the ramp-up. “If we could go to 45, we would have a market for that,” Brégier said. But the supply chain would find it hard to follow. According to Brégier, those companies concerned are mostly small ones, as some of these businesses have had financial troubles during the recent downturn. This has made it hard for them to invest to be ready for the ramp-up and, at the same time, airframers have continued to exert downward pressure on prices paid for what they produce, making cash even harder to find. Airbus’s answer to this is that smaller, tier-two and -three firms should consolidate. “They could be more efficient, financially more robust and could more easily transfer work to low-cost countries,” Brégier suggested. To help those small companies that are having a hard time, Airbus is a partner in Aerofund–a financial support organization that also has French engines and electronics group Safran as a partner. Also, Brégier is the president of “Pacte PME” (“SME compact”), a group of 36 large corporations that aim at a fairer relationship between them and small subcontractors. But difficulties can also affect major first-tier Airbus partners. EADS subsidiary Aerolia, an aerostructures specialist, has a factory in Tunisia but it had to close it during the North African country’s revolution early this year. Growth plans there have been postponed by two or three months, Brégier said. What about the transition from production of the existing A320 to the re-engined A320neo family? “Transitions are always delicate but, fortunately, this one will be short, as we have brought forward the Pratt & Whitney version’s entry into service to October 2015,” Brégier answered. He forecast that, in 2018, about 40 Neos will be produced. On the A330 widebody, the production rate is to increase from nine per month, early in 2012, then 10 per month in the second quarter of 2013. This ramp-up has contributed to making the suppliers’ workload heavy. Aerolia, for example, manufactured 45 percent more components in 2010 than in 2009. Brégier predicted the A330 will continue to be manufactured until at least 2020, despite the A350XWB’s arrival on the market in 2013. He would not comment on the anticipated end of the A340’s 18-year production run (ended in 2010), but he did concede that increasing fuel prices and evolving ETOPS rules for twin-engine operations made the quad “less competitive.” On the A380, Brégier said about 25 copies should be delivered this year. However, he said, “We are keeping a close eye on the uncertainties Rolls-Royce is facing with one Trent 900 supplier.” He was referring to problems at Japan-based turbine blade manufacturer IHI, whose factory was seriously damaged by the earthquake and subsequent tsunami in March. According to Brégier, after having been stopped for several weeks, the factory has been restarted and Airbus hopes to meet nominal production levels in July. “On the A380, since the end of 2009, we have fulfilled our delivery schedule commitments,” Brégier noted. He asserted that Airbus now has a good command of the production ramp-up. The rate is predicted to reach about 40 per year before 2020. From an accounting standpoint, the double-decker is expected to contribute to Airbus’ profits, at last, in 2014 or 2015. Having had to cope with all the aforementioned supply chain issues, how is Airbus preparing for the A350? Is the new widebody’s supply chain ready? Specifically asked about composite component providers, Brégier answered that some of them are using such materials for the first time. “The challenge is not really in large panels but rather in clips, frames, stringers and so forth,” he said. Brégier admitted that Airbus is now solving teething problems in material quality and control processes. The first A350XWB final assembly is to start late this year. Brégier insisted system installation in the airframe must be “robust.” This is especially important for electric systems in a composite fuselage, and Airbus will be mindful of fairly recent wiring problems with the A380 program. But Brégier expressed confidence that the production ramp-up would be relatively easy, once the tooling is in place at the suppliers’ facilities. In terms of orders, Airbus is expecting 2011 to exceed 2010, which ended with 574 net sales. There were 70 cancellations last year and these are expected to stay at a similar level, between 10 and 15 percent of annual orders, in 2011. As for costs, Brégier emphasized that the Power 8 cost-cutting plan had its objectives surpassed. Running from 2007 to 2010, Power 8 envisaged a total €2.1 billion ($2.9 billion) savings but ended up with €2.5 billion ($3.5 billion) saved. A follow-on plan, Power 8+, is running through 2012 to save another €650 million ($900 million). The amount saved with Power 8 equates to a €0.25 improvement in the euro-dollar currency exchange rate, Brégier noted. “A weak dollar quickly annihilates our competitive efforts,” he said. Therefore, while half of an A320’s cost basis is in dollars, this proportion will rise to three quarters on an A350. Meanwhile, Airbus is still hiring. The company recruited 2,200 staff (half of them in France) in 2010. This year, Brégier sees 4,000 people being hired throughout Europe, with the same proportion in France.