3-7-18 11:43 AM EST | Email Article
By Robert Wall 

European plane maker Airbus SE said Wednesday it plans to cut production of its flagship A380 superjumbo and A400M military transport aircraft, threatening thousands of jobs, though a wider boom in demand for airliners may mitigate staff cuts.

The reductions are set to take effect from 2020 and would affect about 3,700 jobs, the company said in a statement. Airbus said it would try to shift most of those employees affected in Germany, France, Spain and the U.K. to other positions.

The move comes despite bumper commercial plane demand due to a steady increase in airlines' passenger numbers, driving Airbus and larger rival Boeing Co. to raise output of their most-popular planes. The companies this year expect to produce a combined industry record of around 1,600 airliners.

But Airbus's A380 has failed to reap the benefits. Airlines, worried about filling a plane that seats more than 500 passengers and carries a price tag of $445.6 million before typical discounts, have shied away from buying the aircraft.

Airbus, which has around 130,000 employees, has had to repeatedly cut its output plans for the A380 because of a lack of orders. When it embarked on the program, the company said demand could require it to build more than 40 planes a year -- a level it never reached. It said Wednesday it would lower output to six planes a year starting in 2020, after producing 15 last year.

Emirates Airline, the world's largest by international traffic, in January said it would buy up to 36 more of the A380 superjumbos. That deal allows Airbus to sustain A380 production at the six-plane-a-year level, which it described as a minimum production rate at which losses are manageable.

But other big-name airlines have been hesitant to embrace the A380. No U.S. carrier has bought the plane. Air France-KLM SA and Deutsche Lufthansa AG are among the airlines to have cut orders for the plane. Virgin Atlantic Airways Ltd. has never introduced the model despite ordering six.

The bleak outlook for the A380 was punctuated late last year when the first of the jets, once operated by Singapore Airlines, was placed in long-term storage after the airline opted not to extend an initial lease period. The carrier is the second biggest A380 customer, having ordered 24.

Airbus Chief Executive Tom Enders last month said he was optimistic the company would secure deals for the plane from existing and new customers.

Boeing also has struggled to win orders for its biggest plane, the 747-8, and had to cut output.

For Airbus, the production cuts on the military A400M come after years during which the company struggled to get the plane out the door and to develop some of the promised technical features. Airbus said it would build 15 of the planes this year, after delivering 19 last year. It plans to build 11 of the planes in 2019, and eight annually thereafter.

Airbus last month took a EUR1.3 billion ($1.6 billion) charge against its 2017 earnings on the A400M, raising to more than EUR8 billion the combined earnings hit from the program.

The company is at risk of losing money on both the two high-profile plane programs without a significant increase in new orders after massive investments. Airbus Chief Financial Officer Harald Wilhelm last month said that lowering build rates for both plane types would keep them in production and buy time to secure further deals.

Write to Robert Wall at robert.wall@wsj.com


(END) Dow Jones Newswires

March 07, 2018 11:43 ET (16:43 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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