Airbus Mobile has impressive quarter

The surprise announcement that Bombardier CSeries planes would be built in Mobile
was followed by more orders for Mobile-built jetliners...

Jane Nicholes
December 2017

To put it mildly, it’s been a noteworthy quarter for the Airbus U.S. Manufacturing
Facility at the Mobile Aeroplex. There were more orders for Mobile-built jetliners, and
on top of that there’s a possibility Mobile will get a second assembly line.

The news over three months:

• In October Canada’s Bombardier announced it would build CSeries jetliners in
Mobile in a teaming arrangement with Airbus.
• In November a record order for A320 and A321 jets was announced by Indigo
Partners. Mobile will build planes for Indigo participant Frontier.
• In December Delta Air Lines said it was ordering 100 A321neo jets, which will be
built in Mobile.

Mobile quickly followed that December order with the delivery of its 50th plane, this
one to Delta Air Lines. At the same time, it said it reached its goal of four aircraft per
month.

“We’ve met all our commitments. We’re still very pleased to be here in Mobile and on
the Gulf Coast. It’s been everything we hoped it would be,” said spokeswoman Kristi
Tucker.

The plant at the Mobile Aeroplex at Brookley employs about 400 people directly and
more than 225 indirectly, officials said.

Record purchase
At the recent Dubai Airshow, Airbus announced that Indigo Partners wanted 430
planes, 273 of them A320neos and another 157 A321neos. At current prices, it’s a
$49.5 billion deal. Among the airlines involved is Frontier, which was already
scheduled to receive Mobile-made jetliners in 2018.

Although Airbus doesn’t release exactly how many planes are made where, expect
Mobile to be turning out a good number of them. At capacity, Tucker said, Mobile’s
assembly plant can’t fulfill all of the company’s U.S.-based orders. On the other hand,
“with a few minor tweaks” it can increase its production rate from four a month to
eight per month, she said.

“Any A320 order anywhere in the world for any airline is good for Airbus, because it
shores up our backlog, our order book, which then is good for Mobile because we
are part of the worldwide global production network,” Tucker said.

“You can always celebrate any A320 order, but we’re certainly happy when there is
one for a U.S.-based airline because that ups the opportunity for those aircraft to
come here.”

Not long after the Indigo order, another order came in that was clearly a win for
Mobile: Atlanta-based Delta Air Lines ordered 100 A321neos.

Airbus Chief Executive Officer Tom Enders said it is “good news for our employees in
Mobile, Ala., where most of the Delta planes will be manufactured.”

Chris Curry has been executive director of the Mobile Airport Authority for less than
two months, coming from Tallahassee where he was aviation director. He’s counting
airplane orders and studying the available space at Brookley for a possible second
assembly line.

“I think the combination of the two is a significant economic impact to the community
for, it appears to me, at least a couple of decades,” Curry said.

Second line?
In no small part because of the extended tanker competition with Boeing - a contest
Boeing ultimately won - Airbus’ interest in locating a final assembly line at Brookley
was known for years in Mobile. News of a possible second assembly line came
seemingly out of nowhere, when Airbus announced in October that it would take –
not purchase -- a majority stake of Bombardier’s CSeries aircraft.

Bombardier is headquartered in Montreal and the CSeries final assembly line is in
Quebec. The plane itself is a single-aisle configuration with 100 to 150 seats,
compared with the Airbus A320neo capacity of 164 to 189. The second final
assembly line in Mobile would serve U.S. customers, according to a joint news
release.

But the details, including state or local incentives, if any, have not been worked out
completely. It’s not known, for instance, if the CSeries parts would be shipped by
water, air or railroad. And the outcome of a trade complaint filed by Boeing could
mean the second line won’t happen at all.

But Bombardier in November said it would spend $300 million on its CSeries
assembly facility in Mobile, creating as many as 400 to 500 direct jobs and 550 to
700 indirect jobs at supplier and support companies. The forecast was part of a
regulatory filing, according to the Montreal Gazette and Wichita Business Journal.

The announcement about the Airbus/Bombardier deal was a bombshell.

“Color me very surprised,” said Richard Aboulafia, an industry analyst and vice
present of The Teal Group. “Wow, I didn’t see that one coming. Not only didn’t I see it
coming, I didn’t see Bombardier being willing to surrender the program for $1.”

Bombardier was known to be having financial problems with the CSeries. Aboulafia
said he thinks the company was running out of money.

“They just don’t have the global critical mass that Airbus does,” he said. “They had
always bitten off more than they could chew with the CSeries. That was clear.”

But the future of the CSeries in Mobile depends on the outcome of a trade dispute
between Bombardier and Boeing. Boeing claims that a deal between Bombardier and
Delta for 75 planes undermines the American manufacturer because Bombardier
allegedly set unreasonably low prices. The administration wants to slap a 300
percent tariff on the planes.

Planes built in Mobile, however, could be considered American-made. Bloomberg.
com quotes a U.S. government fact sheet as saying the tariffs apply to planes
entering the country “partially assembled.” That issue also must be resolved.

The International Trade Commission will make the final determination of whether the
Delta deal actually harmed Boeing, Aboulafia said. The final hearing was scheduled
to begin Dec. 18.

“They can determine the damages, and then if the ITC says, ‘Yeah, but they weren’t
hurt,’ those damages vanish,” Aboulafia said. “Everything goes away. There are no
tariffs, and there’s no reason for that second line.”

The partnership must jump through various regulatory hoops as well.

“We’ve announced our intent to put an assembly line here for the CSeries aircraft in
Mobile,” said Tucker. “But the caveat is the deal is not done. The deal has to be
approved, to go through all kinds of regulatory approvals, which we don’t expect until
towards the end of next year.”

Aboulafia predicts the second line won’t be as large an operation as the original
$600 million plant because the CSeries program isn’t as big as the A320 series. But
the CSeries “is still a very good jet,” and Airbus can make money on it despite
Bombardier’s financial problems.

As for the airport authority, which would lease additional land to Airbus if needed,
Curry is making plans.

“We believe that it certainly will require additional land for expansion,” Curry said.
“Once the announcement was made we started looking and talking with
representatives of Airbus to determine how much land and where it should be
located. That process will continue over the next maybe eight months, as far as the
planning.”

Curry adds, “The impact is significant, both directly and indirectly. Certainly the
opportunity to add additional jobs in this community, but also with the amount of
traffic and businesses associated with their expansion, we hope that it would also
lead to additional air service opportunities.”
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