Airbus A330 Production: To Cut Or Not To Cut?

"In one of my previous articles I looked at the Boeing 777, which has been Boeing's bestselling model but will be replaced by the Boeing 777X in 2019. Currently there are more orders needed to fill the gap between supply and demand.

The Airbus (OTCPK:OTCPK:EADSF/OTCPK:OTCPK:EADSY) A330ceo (current engine option) is facing a similar challenge. The Airbus A330neo (new engine option) is expected to enter service in Q4 2017, with a first flight in mid-2016. So in essence Airbus should accumulate enough orders to keep producing the Airbus A330ceo until the introduction in December 2017 and preferably beyond that point until somewhere in 2018-2020 when production of the neo model picks up pace. In this article I will look whether Airbus will be able to fill the gap.

For the analysis I make the following assumption(s):

The gap that has to be closed goes all the way to December 2017. Assembling of the A330neo will of course start earlier, but production rate on the earliest neo models will be so low that the production line of the ceo model has to be filled at least until Q4 and preferably overlap.

Current production rate is 10 aircraft per month, which will be reduced to 9 per month in Q4 2015.

Production rate is based on a production cycle of 11 months per year.

Normalizing the production rates to per year outputs the productions rate for the A330 currently already is on 9 per month and will reduce to 8 per month.

Current backlog: 193 units (January 2015)

The minimum period that has to be bridged is 36 months, preferably there is some overlap between the A330ceo production and the A330neo production."

Font: http://seekingalpha.com/article/2888626-airbus-a330-production-to-cut-or-not-to-cut

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