Oct. 18 (Bloomberg) -- Airbus SAS, the world’s largest planemaker, said its growth and that of competitor Boeing Co. may be hampered by component suppliers being starved of credit.
Some banks are holding back on lending to reduce risk and maintain higher reserves, Chief Executive Officer Tom Enders said today. The lack of credit makes it difficult for smaller companies with higher-risk profiles to get the extra equipment and workers to raise output to the levels needed, he said.
“We see some troubling signs of lack of capital, especially with some of our smaller suppliers,” Enders said at a conference today. “They’re the ones who get hit first when banks tighten up their capital.”
Airbus is making heavier demands on suppliers now as it ramps up monthly production of A320 single-aisle planes from 38 in August to 42 by the second half of 2012. The planemaker is mulling a further increase to 44 if it can be assured the whole supply chain can keep up, Enders has said.
For some components, planemakers rely on a single company, said Enders. If that one supplier is hindered by a lack of capital, it can have a knock-on effect for an entire aircraft program, according to the CEO. So far, the risk is “manageable,” he added.
“At this stage, it’s reason for concern but not for panic,” Enders said following a speech given at an aircraft suppliers’ conference in Toulouse today sponsored by SAE International. “We’re trying to help at Airbus wherever we can with smaller suppliers so that there’s no disruption to the supply chain.”
‘Plug and Play’ Planes
Airbus is also relying on equipment and systems makers to keep pace as it moves toward production of its A350, a new widebody, long-range plane that’s set for first delivery to customers at the end of 2013. Assembly of the first A350 is scheduled for year-end.
Supply chains could also have to respond if commercial planemakers in the future move to develop ’’plug and play’’ jets that would let builders adjust their size and shape to respond to changing demands, Enders said. The current eight- to 10-year period needed to develop new planes is far too long for customers, yet moving more quickly can throw up difficulties that undermine investor and client confidence, he said.
“Our problem is delivery,” Enders said. “While the world is fighting off an economic downturn, this industry is leaking money left, right and center on new programs.”
Ipad in Cockpits
Cost overruns can put off planemakers from embarking on new projects and that in turn could mean entrants to the market overtake the established manufacturers “sooner rather than later,” he said.
Airlines suffer the same budgetary constraints, hampering the adoption of new technologies, such as the Apple Inc.’s iPad, according to Enders.
“Today, we’ve reached a point where iPads are changing the way pilots want to interact with the aircraft,” he said. “But we don’t have them in the cockpit. So why would they wait a decade for us to integrate them?”
Enders cited United Airlines Inc. figures that showed an iPad can save an airline 16 million sheets of paper and more than 300,000 gallons of fuel a year. There are also new materials that have yet to be adopted by civil planemakers, whereas military planes have much more upgradeable platforms that can adopt the latest technology.
“What about stopping the traditional approach of launching a series of completely new aircraft, one after the other,” Enders said in the presentation. “What about switching to a single aircraft that could rapidly and significantly evolve as new technology matures and comes on line.”
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