Airbus works with suppliers to lower cost of Alabama jet

Airbus works with suppliers to lower cost of Alabama jet
Airbus SE A220 assembly line at the Airbus Canada LP in Quebec. (Valerian Mazataud/Bloomberg)

Airbus SE is pushing suppliers on its A220 jetliner program to renegotiate contracts and reduce the price of parts to help slash costs and turn the former Bombardier Inc. model profitable when production begins at a new assembly line in Alabama this year.

Safran SA said it’s in talks with Airbus to trim expenses in the A220’s cabin, while engine producer Pratt & Whitney and partner MTU Aero Engines AG have agreed to deliver a 10% savings, people with knowledge of the plan said. Senior Plc says it could win more work by pitching production at low-cost sites.

Airbus is pressing for cost reductions against expectations of higher A220 sales as it brings to bear a formidable marketing machine and offers the model alongside its in-house A320-series narrow-body jet. The grounding of Boeing Co.’s 737 Max has presented a chance to grab more of the single-aisle market.

“Airbus are clearly a lot more confident in their ability to sell the A220,” said Bank of America Merrill Lynch analyst Benjamin Heelan. “Being able to go to suppliers with higher medium-term volumes is a big lever to get costs down.”

Airbus is striving to reach breakeven on the A220 after paying Montreal-based Bombardier $591 million to lift the Airbus stake to 75%. While the jet’s composite wings, airy cabin and state-of-the-art cockpit make it a technological leader, Airbus Canada head Philippe Balducchi said in January that overall costs need to be reduced by “a significant double-digit” percentage.

A spokeswoman for Toulouse, France-based Airbus said significant progress has been made with some suppliers but that it remains in talks with others. The firm will invest as much as $1.1 billion in the A220 this year.

Some savings could come from looking at component design or increasing commonality with the A320, according to the people familiar with the plans. Airbus’s leverage with suppliers may be high right now because many also serve Boeing, where the Max crisis has stunted demand.

Safran CEO Philippe Petitcolin said the challenge is to cut costs without compromising on the quality of the jet’s interior. The Paris-based group supplies A220 seats, galleys, lavatories and overhead storage bins, as well as oxygen, waste-removal, water and sound-insulation systems.

Senior CEO David Squires said the U.K. firm is in talks with Airbus to pare A220 costs. While it now provides air-conditioning systems and ducting, the recalibration may present an opportunity to bid for aerostructures work via its lower-cost southeast Asian operation, he said.

Airbus will most likely revisit the entire A220 supply chain, BAML’s Heelan said, as it targets mid-2020s output of 10 jets a month at the former Bombardier plant in Mirabel, near Montreal, and four at the Airbus plant in Mobile.

Airbus is growing its footprint at the Mobile Aeroplex at Brookley, adding a new assembly plant for the A220. The original final assembly line has been devoted to the A330 family of aircraft but added some A220 production in August 2019. (Airbus)

Bombardier, which spent $6 billion on the A220, originally sought breakeven this year, but said Jan. 16 the goal had slipped, prompting an exit from the jet sealed this month when Airbus bought its remaining stake.

In a sign of the competitive advantage the model offers, Airbus on Feb. 13 secured an order from Nigerian startup Green Africa Airways that appears to threaten an existing accord for the Boeing Max.

Airlines including Air France-KLM have expressed an interest in a larger, 160-seat-plus A220. Airbus CEO Guillaume Faury said last month that it’s not currently working on a stretch model but sees that as a likely development.

(Contact the reporters at [email protected], [email protected] and [email protected].)

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