Airbus Group NV said it will cut production of its A330 twin-engine jet in 2015 in an indication that demand for the long-range plane is insufficient to sustain its current construction rate.
On Friday the Toulouse-based company said it will reduce the build-rate of its A330 model to nine per month in the fourth quarter of 2015. Currently, Airbus is constructing 10 A330s each month, a company record. The aircrafts sales surpassed the European plane makers own forecast and is a key income provider.
Airbus began taking orders for its new A330neo, an updated version of the A330, with the core difference between the two being the new engines. The company has already booked commitments for more than 120 units of the model. Due to the high number of orders, Airbus scrapped plans to build the A350-800 model, a shorter version of its all-new A350 wide-body jetliner. Deliveries of the A330neo are expected to start from 2017.
Sanford Bernstein analysts said that production of the 20-year-old plane may be cut even more, down to six per month in 2017, as they forecast orders to decrease sharply in 2016. They do not expect sales to bounce back once the company transitions to the A330neo.
Rivalry between Airbus and Boeing Co. continues as the companies introduced plans to build more aircraft. The French company has been signaling a possible increase of production of its single-aisle A320 series, while its U.S. counterpart said it will boost construction of its 737 models by 10, from 42 to 52 a month.
The two companies are switching to new and more efficient engines for their updated models to help airlines cut fuel costs. Currently Rolls-Royce, General Electric and Pratt & Whitney all offer engines for the A330. However, the only supplier for the A330s upgraded version will be Rolls-Royce.
“Our role as an aircraft manufacturer is to anticipate and adapt our output to ensure we continue to maintain a smooth production flow for Airbus and for our supply chain,” Airbus executive vice president for programs Tom Williams said in a statement.
Airbus Group NV lost 2.17% on Thursday and closed at €42.75 in Paris. On Friday the stock gained 0.37% by 12:40 GMT to trade at €42.91, marking an 11.46% one-year decrease. The company is valued at €33.55 billion. According to the Financial Times, the 25 analysts offering 12-month price targets for Airbus Group NV have a median target of €58.00, with a high estimate of €70.00 and a low estimate of €34.00. The median estimate represents a 35.67% increase from the last close price of €42.75.
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