Airbus prepares for higher jet production amid up-front costs

Airbus is getting ready to make a lot more jets, planning to increase the production of its A320neo aircraft by about 50 per centto 75 planes a month by 2026.

This big goal means they need to spend a lot upfront on building things and hiring more people, aiming to work at full speed by 2026 or maybe 2027.

Chief Financial Officer Thomas Toepfer said they have to hire early to meet this future need, but this means spending money now while not seeing the full benefit until later.

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He mentioned, "We want to pre-hire to be ready for rate-75 in 2026. But, the costs are hitting us now while the full speed only comes in 2026, and maybe 2027 when we are steady."

They're adding thousands of jobs and making two new assembly lines.

Even with the high costs and maybe going over budget, Airbus is sticking to its plans.

Toepfer didn't share details on the first-quarter tasks but noted that spending on speeding things up will pay off later on.

In 2023, Airbus brought in 13,000 people, making 10,000 new jobs, to keep ahead of any supply chain issues in these tough market times.

The company is firm on its goal to make 75 A320neo aircraft a month, with Toepfer confirming, "We are on track to hit the rate."

As Airbus works to meet growing demand, it's facing hurdles in hitting its private goals.

Yet, Toepfer said strong deliveries in 2023 show they're moving towards their targets. Once they reach making 75 planes a month, Airbus plans to slow down a bit to let suppliers catch up on their own spending.

Toepfer pointed out, "I think even when we hit rate-75 we won't be at top speed, but will keep the rate for a bit to get rid of these speed-up costs."

They'll keep a close eye on ramp-up costs when they share their quarterly update on April 25.

Though supply chains are getting better, Airbus wants to keep pushing suppliers to invest more.

Toepfer talked about finding a middle ground between pushing hard and not overloading suppliers with too much work amid industry uncertainties.

Some suppliers are worried about Airbus' fast plans and the chance of having extra capacity if things slow down.

But Toepfer believes Airbus can keep up with production levels, thanks to its big backlog of orders.

He's also hopeful about better profit margins in the Defence and Space division, even with ongoing issues.

(With inputs from Reuters)