My Account Menu

CAPA Login


Register to trial CAPA Membership!

More signs that aircraft production could be cut in 2009 – Suppliers Share Wrap

10-Nov-2009

Airline passenger traffic crept into positive territory in Sep-2009 and there are signs that the decline in yields has finally abated, but aircraft output could be reduced by smaller manufacturers in 2010. In particular, regional jet production could be cut back next year.

CFO at Brazilian manufacturer Embraer, Luiz Carlos Aguiar, has already announced that revenue in 2010 could be 10% lower (a cut of around USD550 million), due to lower commercial and business aircraft output. A formal forecast is due to be made in Dec-2009. Embraer recently cut its production guidance from 242 to 232 aircraft for the year, the third downgrade over the past eleven months, and admitted that it is going through a “rough ride in terms of new sales”.  

Meanwhile, Bombardier announced this week that it would decide over the next few months whether it would reduce output at its Mirabel facility near Montreal, in response to cancelled orders, lower ordering in 2009 and the general downturn in civil aviation markets.

Like Embraer, Bombardier is doing it tough due to the downturn in both the regional and business jet markets. CEO, Pierre Beaudoin, stated the company is finding it a “tough… commercial aircraft market right now” despite several sales campaigns aimed at boosting orders. It is now “likely” that the company will make more adjustments to both production and labour levels. Bombardier has already shed 4,400 positions this year, about 6.5% of its workforce.

Bombardier is still confident in the long-term opportunities in the market, but is up-guaging its aircraft to better cater to airline demands. The CEO forecast that Bombardier’s new 100-149 seat CSeries could add between CAD5 billion and CAD8 billion p/a in revenue for the company, once it reaches service in 2013. However, the aircraft has just 50 firm orders to date and a potential big customer, Qatar Airways, has reportedly frozen negotiations on a potential order until Bombardier meets some of its demands on the aircraft.

As for the larger manufacturers, Airbus has stated that it could decide on production cuts later, but is aiming to maintain production levels at current rates. The European manufacturer reduced A320 production from 36 to 34 aircraft per month in Oct-2009, and froze A330/A340 production rates this year. The company is due to provide a forecast of its 2010 deliveries in Jan-2010.

Boeing will cut back B777 production in 2010, from seven to five aircraft per month, but is holding narrowbody production steady, at around 33 aircraft per month. The company hopes to ramp up production of its new B787 once the aircraft undergoes its maiden test flight, due before the end of the year.

However, narrowbody production rates have some major suppliers worried. Spirit AeroSystems, the world’s largest producer of aircraft interiors, expressed its concern that both Airbus and Boeing could cut narrowbody output later in 2010. CEO and President of Spirit, Jeff Turner, commented that there are “so many signs out there that say rates need to trim" when the company presented its 3Q2009 results in early Nov-2009.

In trading on Monday, Embraer gained 4.3%, while Boeing was up 3.4% and EADS, Airbus’ parent, was down 0.2%.

Selected Aviation suppliers’ daily share price movements (% change): 09-Nov-09


Want more analysis like this? CAPA Membership gives you access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find out more and take a free trial.