Economic development
Bucking headwinds in Mobile

The pandemic has clearly damaged the economy, but Airbus in Mobile,
despite facing headwinds that forced a production pause, is building again
and seems to be reasonably healthy.

 No one is sugarcoating the state of the aerospace industry since COVID-19 created
a global health and economic crisis.
 Tom Williams retired as chief operating officer for Airbus in 2018. As a panelist in a
June 9 webinar staged by FlightGlobal.com, he recalled dealing with the financial
impacts of the 9/11 terrorist attacks, the SARS virus and the economic downturn of
2008 during his Airbus career.
 “This,” Williams said, “is 10 times worse.”
 The bad news for both Airbus and rival Boeing keeps piling up, especially regarding
their commercial jetliners. Not long ago Guillaume Faury, CEO at Airbus, said the
aerospace industry is facing its “gravest crisis.” The international corporation has
been hemorrhaging money: $4.78 billion in the first quarter of the year. Production is
being cut by one-third; more specific large-scale production cutbacks and layoff
announcements may come this month.
 Suddenly, big passenger jets are all but obsolete. Airbus is retiring its iconic A380
and intends to deliver the last of those planes next year. People fear air travel
because of the virus; planes are either flying virtually empty of passengers or not
flying at all.
 “Sixty percent of the world’s jet planes are parked right now,” said Richard
Aboulafia, vice president of analysis for Teal Group. “That’s never happened before.
Nothing like that has ever vaguely happened before.”
 As for Boeing, it has announced layoffs of 6,000 employees and intends to reduce
its total employment of 160,000 by 10 percent through a combination of voluntary
and involuntary separations. In the month of May, Airbus delivered 24 commercial
planes to customers. Boeing delivered none.
 Boeing has only recently restarted work on its 737 MAX aircraft, which had been
grounded because of fatal crashes and technical problems. Recertification of the
aircraft by regulating authorities is expected. But both Airbus and Boeing have
suffered cancellations and deferrals of orders for airplanes that airlines simply no
longer need.
 In the short term, “It’s going to be an ugly couple of years,” Aboulafia said.
 Said Williams, “We need to be thinking about preparing for a new reality, which will
be very, very difficult.”
 But for now, the Airbus operation in Mobile has been relatively unaffected. Airbus
has finished its second assembly line, this for its A220 series, and the first A220, for
Delta Air Lines, recently conducted its first test flight.
 As the pandemic worsened, Airbus “paused” its Mobile production for a few weeks
but has since restarted. However, 40 subcontractors in its engineering center are
being terminated, including 26 announced June 15. Employment in Mobile is about
1,300, according to Airbus spokesperson Kristi Tucker.
 Prior to the pandemic, Airbus was ramping up the A220 series and building A320
series planes at the rate of 6 per month with a goal of Rate 7 by the end of the year.
“That’s changed, but we’re not detailing what that new rate is right now,” Tucker said.
 No further rate changes are expected but the situation is being monitored, she said.
The original projection of building four A220s a month by the middle of the decade
still holds.
 The overall aerospace picture may be ugly, but the Mobile operation has several
assets that should protect it, according to analysts.
 “Mobile is just not that big a part of total Airbus production, so it is unlikely that they
would take too many numbers out of that,” Aboulafia says. “They deliver planes into
the U.S. market. I don’t think much changes.”
 Two main factors have been crucial to Mobile’s stability in uncertain times: Mobile is
building the right kind of planes. The A320 and A220 are relatively small and more
energy efficient. They can fly farther and carry the smaller number of passengers
that seem to be the new normal in air travel. Airlines are shifting away from widebody
jets and toward single-aisle planes.
 Williams laughingly admitted his pro-Airbus bias when asked whether Airbus or
Boeing is better positioned for the future. “This crisis comes at the worst possible
time for Boeing,” he said. “I think Airbus 220 is a great product.”
 Boeing doesn’t have a similar model in the works and has been struggling with the
737 MAX.
 The second factor is the politics of world trade. Aboulafia said the Airbus decision to
build commercial jets in Mobile proved to be brilliant because of the tariff situation.
 “The reason Mobile is extremely relevant is the tariffs that the Trump Administration
has imposed on Airbus. This is a great way to get around those tariffs,” Aboulafia
said. “The Trump administration made cutting trade ties with allies a high priority,
except Alabama is kind of the heart of the Trump territory. So he’s going to make an
exception for planes built in Alabama, even though otherwise they would fall under
the heading of planes to be taxed.”
 The result of the presidential election will likely be a wash for Airbus in Mobile, he
predicted. If Trump is re-elected, Airbus will still need “political top cover against
trade issues,” Aboulafia said. If Democrats gain power, “They are less likely to be
protectionist, but on the other hand they are less likely to care about Alabama.”
 Other strong points in Mobile’s favor are the costs of doing business in dollars
instead of euros and the lack of unions. However, Aboulafia said unions are less of
an impediment in Europe than one might think. German unions historically have
acted as partners with Airbus, while French unions are well aware of how dire things
are.
 Predicting the future in the face of the pandemic amounts to guesswork, said
Williams, but research and planning can’t just stop.
 “You’ve got to assume that this will be fixed,” he said at the webinar. “There will be a
vaccine. We’ll come out the other side of it. And aerospace will still be key.”

-  Jane Nicholes
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