Airbus ready to cut its output, boost financing

Paris: Airbus is ready to cut output for the first time since the aftermath of the September 11, 2001 attacks in the United States if the global financial crisis continues to spiral, the planemaker's head said on Monday.

In a switch of emphasis, the European rival to Boeing also stands ready to help more airlines finance their purchases as credit dries up, Chief Executive Tom Enders told reporters.

The financial crisis and looming recession are a severe blow for airlines barely recovering from a summer spike in oil prices and Airbus has predicted a downturn in orders next year.

Deferrals

Last month Airbus shelved plans to increase production by around 10 per cent, which had been designed to whittle down a record order backlog, as the credit crisis and falling air traffic threatened a slew of order deferrals and cancellations.

"We are not in a bad position as we go into this [financial crisis] situation but we do not exclude further action if the situation deteriorates further," Enders told a press dinner organised by the French association of aerospace journalists.

Airbus has frozen production at 36 single-aisle aircraft and 10 wide-bodied planes a month, postponing indefinitely its previous plans to boost these levels to 40 and 11 respectively.

Airbus, which expects to produce and deliver a record 470 aircraft this year, last cut its annual deliveries in 2002.

Airbus is also ready to swing back towards financing aircraft sales as the $50-$60 billion (Dh183.5- Dh220.2 billion) plane market turns lower.

Pulling weight

In contrast with Boeing's dedicated financing arm, Airbus has tended to limit its financing activities to prop up sales though it is accused by Boeing of slashing prices instead.

Airbus currently has $1.2 billion in financing exposure, according to latest quarterly results, and some executives have recently talked of doubling this in 2009. But Enders indicated the figure could go sharply higher, noting Airbus had financed as much as $6.1 billion in 1998 and $4.8 billion in 2003.

"Much depends on how long credit squeeze lasts," he said.

"In principle financing will remain lucrative as aircraft are mobile assets, especially modern, fuel efficient ones."

Airbus is also in talks with the credit export guarantee agencies of France, Britain and Germany to secure support.

"There are credit agencies that can provide backstop guarantees and we are also willing to pull our weight," he said.