When your new product is a superjumbo airliner, an economic downturn is bound to cause concern. David Jones reports

IT’S been a year that has posed more questions than Airbus has been able to answer. Why isn’t its flagship superjumbo attracting more customers and orders than it currently is?

Will the World Trade Organisation – in the middle of a probe into alleged illegal state subsidies to the airliner manufacturer – rule against the company, and impose penalties?

Perhaps most importantly of all, how severe will the current global economic turmoil impact on orders and deliveries of the company’s aircraft?

None of these issues can be directly influenced by Airbus’s wingmaking plant at Broughton, near Chester.

But they will certainly all have a bearing, to a lesser or greater degree, on the jobs of the 7,000-strong workforce employed at the plant.

The site is the biggest private sector employer in Deeside, and its continued success is vital if the economy of the region is to thrive.

Some airlines are looking to cancel or defer orders for new aircraft as the slump in global aviation hits passenger numbers and freight volumes.

Airbus expects to finish the year with orders for around 800 new planes – a big drop from last year’s figure of 1,341.

Sir Stelios Haji-Ioannou, founder and largest shareholder of budget airline Easyjet, has urged the company to conserve cash and limit its spending on new aircraft at a time when the economy is heading into recession or worse. Easyjet is one of Airbus’s biggest customers, with more than 300 jets ordered and 120 already delivered.

Airbus can’t bank on the fast-developing economies of the Far East to pull it out of the tailspin in orders. Even China is thinking about throttling back on orders as Chinese airlines rack up losses.

The International Air Transport Association says Airbus and its American rival Boeing are trying to set up financial packages to help airlines pay for new aircraft.

Airbus’s executive vice president for programmes, Tom Williams, said last month that Airbus employees in the UK should not fear for their jobs as “peaks and troughs” were “normal” in the industry.

HE SAID: “We are comfortable with the job numbers. We don’t see any major issues as long as the build stays the way it is.

“This is a cyclical industry. We are not deluding ourselves and we had expected this year to be slower.”

Nevertheless, the European aircraft manufacturer’s parent group EADS has been tightening its belt in readiness for a downturn, embarking on a cost-cutting programme with a series of measure that included 10,000 job losses, 700 of them at Broughton. Airbus has decided to postpone a planned increase in production rates.

More recently, it has said it wants to implement a second phase of the restructuring to achieve further savings.

The company had been battling an unfavourable exchange rate for some years with the euro strong against the dollar.

That had worked against it because it priced its planes in dollars, yet incurred around half its costs in euros.

The surge in the value of the dollar since the summer has gone some way to helping the company regain its competitive edge, but it remains set on outsourcing more work to dollar economies and other countries such as China, India and Abu Dhabi where such trade links might encourage further aircraft sales.

New orders for its flagship A380 superjumbo are still disappointingly low. Indeed, the A380 remains something of a paradox.

Customer such as Emirates and Singapore Airlines who are already flying the jet are pleased with its quiet, energy-efficient performance.

YET the rate of new orders for the jet remains sluggish and Airbus is still a long way off break-even point on the jet’s development cost.

A suggested merger between Abu Dhabi’s Eithad airline and neighbouring Dubai’s carrier Emirates – both A380 customers – could lead to consolidation of some routes and possible cancellation of some of the two airlines’ orders for the superjumbo.

Boeing itself has had problems this year, not least a two-month strike by machinists which has pushed its newest aircraft, the 787 Dreamliner, two years behind schedule.

Airbus had edged ahead in the race for new orders, booking 756 net sales this year, compared with 657 for Boeing.

It is working on its extra wide-bodied A350 as an alternative offering to Boeing’s Dreamliner. But the A350 looks to be falling behind schedule, and the new jet is unlikely to enter service before 2014, at least four years behind its American competitor which has already racked up more than 900 orders, almost double the figure for the A350.

Another conundrum yet to be settled, but one in which incoming American president Barack Obama is likely to have a big say, is whether the US Air Force will buy the airborne refuelling tanker that Airbus has offered – or whether it will opt for aircraft from Boeing.

EADS and US partner Northrop Grumman thought they had secured a £20bn deal for 179 USAF tanker aircraft only for the US defence department to scrap the deal after lobbying by US politicians who want the planes built in America.

THE process for choosing which of the two new tanker jets to buy will be restarted early in 2009 but success in clinching the military order would help secure the jobs at Broughton and even out the ups and downs in production that Mr Williams had referred to and which come as part and parcel of being in the civilian airliner market. Washington has pursued a complaint at the World Trade Organisation in Geneva alleging that Airbus has received illegal state aid for the development of new models.

Airbus, which says it has received repayable loans, has levelled a countercharge against Boeing.

The WTO is expected to rule on the case against Airbus first, but the two manufacturers remain locked in one of the bitterest trade disputes ever with no sign of a negotiated settlement.

Huge issues that will test Airbus’s mettle, for sure.

Yet the aircraft maker has proved time and again that it has the imagination and determination to surmount problems in the past – and it probably has the ability to do so again in the future.

davidrjones