The announcement, now expected in Wednesday's early morning hours, is to split some portion of a 300 to 400 aircraft order between rivals Boeing and Airbus, with suggestions the number could rise even higher.
Industry analyst consensus, as well as prevailing wisdom inside Boeing concludes that the European airframer cannot achieve 60 A320s per month without major expansions of its Toulouse, Hamburg or Tianjin, China lines and opens the door to a US based final assembly line in Mobile, Alabama, current site of an Airbus engineering center sometime late in the decade to meet the replacement demand in North America, while its other lines are devoted to meeting growth demand in the rest of the world.
The strategy assumes at least a partial win with American Airlines by Airbus, delivering A321neos to replace the aging fleet of 757s, which serve as the workhorse of the carrier's fleet. And more broadly a supply chain that can handle the record rates.
Key to Airbus sales strategy is the commoditization of narrowbody travel in the US, guiding consumers selecting travel based on the fare price rather than differentiated product that can be leveraged for a higher price tag.
Wielding a nearly 25% improvement in seat mile costs, according to an AirInsight report comparing the A321neo to the 757, American Airlines would gain a significant upper hand in crowded and price sensitive markets.
The result Airbus is banking on is American's legacy US competitors, Delta Air Lines, United Airlines and US Airways, all following suit with major orders to secure delivery positions to replace their own aging fleets of 737 Classics, MD-80s and 757s with A320neos.
Airbus was aiming to capitalize on Boeing's perceived indecisiveness on the future of the 737, though news of a re-engined 737, or at least some version of it, offered to American Airlines may stave off a mass exodus of customers to the A320neo.
Though a split but, say industry watchers, allows American to compete Boeing and Airbus on an airframe by airframe basis, forcing both to trade margins for marketshare.
Mobile Rising
When it first bid on the US Air Force KC-X tanker contract, Airbus and then-partner Northrop Grumman said it would establish an A330/KC-45A final assembly line in Mobile, Alabama after the initial test articles were produced in Toulouse.
To reduce its risk further, Airbus was to build A330-200 freighters in Mobile as well, providing the airframer an expansion of its industrial footprint at Boeing's doorstep, as well as providing its business access to non-Euro Zone based production costs.
Boeing was able to block that foothold at the end of the protracted and winding tanker competition, with its KC-X win that will see it build the Air Force's new KC-46A, though the Air Force now says the cost of the project is now forecast to be a billion dollars higher than the company's winning bid.
Though despite its victory in the strategic deal, Airbus may look to Mobile to build A320neos to serve the demands of US fleets.
The European airframer has been expanding its footprint in the US with approximately 200 engineering jobs at the Mobile facility focusing on cabin engineering for its widebody aircraft, says Airbus.
While Japanese car-maker Toyota built its first Kentucky plants in 1988 because of import tariffs intended to protect US car makers on their home turf, Airbus faces no such barrier with the Agreement on Trade in Civil Aircraft (ATCA), says Teal Group vice president of analysis Richard Aboulafia, which has afforded equal market access to Airbus and Boeing onto the opposition's home turf.
Though the Toyota comparison may be even more apt, fitting within Piepenbrock's Red-Blue, steadily advancing production rates in worldwide markets, incrementally advancing production rather than leaping forward, only to cut production later.
Airbus CEO Tom Enders said July 15, the airframer was looking into additional production rate increases on the A320 family, examining the capability of suppliers to meet the anticipated demand for the A320neo production ramp up, adding that increases would be 'in notches' and 'not big jumps.'
Narrowbody production is set to reach 42 aircraft per month by the fourth quarter of 2012, with increases to 44 being explored, which follows increases from 18 to 22 A320 family aircraft at the turn of the decade to a near doubling today, all incrementally increased over the past ten years.
As it heads to a rate of 42 narrowbody 737s per month by the first half of 2014, Boeing Commercial Airplanes CEO Jim Albaugh said last week that his company was distantly exploring what it would take to build 60 competing 737s per month, echoing a sentiment reflected in Airbus own strategy: "It'll be a while before we go that high, but I tell you what if they can build them I think we can sell them."
Photo Credit Airbus
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