Airbus Undaunted By Rival's Gambit -- WSJ
July 07 2018 - 2:02AM
Dow Jones News
By Robert Wall
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 7, 2018).
LONDON -- Airbus SE vowed to use what it sees as its first-mover
advantage to push ahead of arch rival Boeing Co. in the market for
smaller passenger jets.
Boeing unveiled Thursday a deal to take control of Brazilian
aircraft maker Embraer SA's commercial aviation business. That
follows Airbus's own agreement, which closed on Sunday, to take
over Bombardier Inc's. CSeries jet program, which has pumped out a
series of smaller airliners.
The deal making has extended the rivalry between No. 1 plane
maker Boeing and No. 2 Airbus to the market for smaller passenger
planes. That comes when Chinese and Russian rivals are developing
their own versions that -- someday -- could compete for sales in
the rest of the world.
On Friday, Chief Executive Tom Enders said assuming the
Boeing-Embraer deal is eventually approved by the Brazilian
government and other regulators, it would still take time before it
would represent a threat to Airbus's CSeries ambitions.
"We made the first move, and we're up and running," Mr. Enders
told reporters in London. Airbus is expected to announce orders for
the CSeries, a single-aisle jet that can be configured to seat
between 100 and 140 passengers, during this month's Farnborough Air
Show, the industry's biggest trade event, held every other year at
an airfield outside of London.
"We can throw, and we do throw, all our weight behind the
CSeries," Mr. Enders said.
Boeing Chief Executive Dennis Muilenburg, meanwhile, said the
Embraer partnership would "enhance and accelerate our growth
plans."
Boeing and Airbus have for years fought it out building the
world's largest jetliners. Now they are going down market: to the
smaller planes they have long shunned. In the past, that market
just didn't seem big enough to fight over.
Today, though, both plane makers are struggling to boost output
of their bigger planes amid record passenger numbers and booming
orders from airlines. To keep costs in check, executives see the
expansion into smaller aircraft as one more lever to pressure
suppliers.
Boeing on Friday said the joint venture with Embraer would
create about $150 million in annual pretax cost savings by its
third year. Airbus commercial plane boss Guillaume Faury said
Friday the company was still assessing its own cost savings from
the CSeries deal.
Bombardier launched the CSeries a decade ago. It was its biggest
plane, and since first taking to the skies has garnered critical
praise. But sales haven't taken off. Airbus bet that by putting its
marketing muscle behind the jet, it could fix that.
As Airbus joins the fight for smaller planes, it has hit
headwinds delivering all of the bigger planes it has promised. On
Friday, executives said it was sticking to its delivery guidance --
promising 800 jets by the end of this year. So far, it has only
delivered 303, thanks to supplier bottlenecks, especially from
engine makers.
Mr. Enders said hitting the full-year plane delivery target,
which investors watch closely because it is linked to cash flow,
will be "hard, " but "doable."
As many as 100 planes were stuck on the tarmac awaiting engines
at one point this year, said Mr. Faury, though that number has
started to fall. Engine maker CFM International, a joint venture
between General Electric Co. and Safran SA, is still slightly
behind on delivering engines, he said. Rival Pratt & Whitney, a
unit of United Technologies Corp., is now delivering as promised.
CFM said it plans to be back on schedule this summer.
Mr. Enders warned of much bigger supplier woes ahead, if the
U.K. didn't come up with a deal with the European Union on the
trade terms of its withdrawal from the bloc. Airbus makes
components in Britain, including the wing assemblies for many of
its biggest jets, but most of its manufacturing is in continental
Europe.
Airbus said it may be forced to ask suppliers to stock parts on
both sides of the English Channel to provide a buffer to mitigate
against supply-chain disruptions. The U.K. is scheduled to leave
the EU in March, leaving suppliers less than nine months to build
such stocks.
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
July 07, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Embraer (NYSE:ERJ)
Historical Stock Chart
From Jun 2024 to Jul 2024
Embraer (NYSE:ERJ)
Historical Stock Chart
From Jul 2023 to Jul 2024