Airbus Orders Fall

January 17, 2013, 7:16 a.m. ET

By DAVID PEARSON

The Wall Street Journal

TOULOUSE, France—Airbus said Thursday it beat its own order intake target in 2012, though gross orders for the Franco-German aircraft maker fell well below its record-breaking performance the year before and those of its archrival Boeing Co.

But with global demand still buoyant for single-aisle jets, Airbus said the emphasis is now on pushing planes out the factory door on schedule rather than chasing fresh orders for which it has few delivery slots for customers. The jet-maker's backlog is now equivalent to eight years of production.

Airbus booked a total of 914 orders last year from 40 customers worth a total of $109 billion, well above the target of 650 orders that it announced one year ago. For 2013, Chief Commercial Officer John Leahy, the company's top salesman, said his sales target is 700 orders.

After 81 cancellations, the net 2012 order intake was 833 aircraft with an aggregate value of $95.8 billion. However, last year's gross order tally was well down from the record 1,608 orders booked in 2011 when airlines, buffeted by high jet-fuel prices, flocked to buy the A320neo, a re-engined and more fuel-efficient version of the company's family of single-aisle jets.

This year it was Boeing's turn to cash in on a product launch of its competing 737 MAX, and for the first time in a decade the Seattle-based company reclaimed the industry's crown in 2012 with 1,339 gross orders and 1,203 net. It was the same story for deliveries, with Boeing's 601 outpacing Airbus's 588, 10% more than in 2011.

Still, the order backlog of the Toulouse, France-based division of European Aeronautic Defence & Space Co. NV will continue to swell in 2013, with orders once again outstripping deliveries, Chief Executive Officer Fabrice Bregier told journalists attending a presentation of the company's 2012 performance.

Airbus's backlog of aircraft that still have to be made now stands at 4,682 planes worth $638 billion on the basis of list prices. The backlog means that airlines that order planes today won't receive them until the end of the decade, a situation that creates risks for both the airlines and Airbus.

But with order intake likely to continue outstripping deliveries this year, the backlog will continue to mount.

Mr. Bregier said the key thing now is to keep production moving smoothly while trying to avoid disruptions in the supply chain as manufacturers of parts struggle to keep up with increasing demand from Airbus and Boeing.

"We have stopped being lopsided and looking only for commercial success. We want profitability," he said. "We have eight years of backlog. We are in a ridiculous industry because we are very successful," he said. Airbus and Boeing dominate the market for large jetliners with competition from Chinese, Russian and other plane-makers unlikely to diminish their duopoly in the short-to-medium term because of the high barriers to entry to the sector, notorious for its high capital costs and technological challenges as airlines seek ever more efficient, safe and reliable jets.

Market conditions remain positive which is why Airbus is confident it can sell 700 planes in 2013, Mr. Bregier said. But even if Airbus were to take in only 400 orders this year, "it would make no difference for the future of Airbus" because of the huge order backlog that it has to work through, he said.

Airbus has leveled off the production rate of its fast-selling single-aisle A320 series at 42 a month, but Mr. Bregier said potential capacity will rise to 46 when a planned fourth assembly line comes on stream in Mobile, Alabama, in the coming years to complement the existing ones in Toulouse, Hamburg and Tianjin in China.

Airbus's market share in terms of orders last year was 41% to Boeing's 59%, and in value terms its market share was 41%. Last year's orders included 739 A320 family aircraft, 58 wide-bodied A330s and 27 A350s.

Partly thanks to its earlier commercial launch, the Airbus A320neo has outsold the Boeing 737neo and accounts for 62% of the sales backlog for these two planes.

Airbus said for now the market is fairly balanced between the two plane makers. "We don't really want to be above 60%, as that's where you could get into a price war," said Mr. Leahy.

However, Airbus only sold nine of its double-decker A380 superjumbos last year, compared with a sales target of 30, a trend that Mr. Leahy attributed to concerns about the weaker economic outlook.

He expects to see 25 orders this year, in line with the expected production rate for the world's largest commercial aircraft. A380 output will dip this year from the 30 of 2012 as production will be disrupted by the changes required in the wing manufacturing process because of cracks that have been found in the wings of some planes.

Mr. Bregier also said Airbus is making "reasonable progress" with the development of its new A350 wide-bodied jetliner, whose first flight is due midyear.

Source:  http://online.wsj.com