Europe's EADS to Assemble Airbus A320 Jets in Alabama

July 2, 2012
The $600 million plant in Mobile will employ 1,000 people and will take the fierce battle for commercial-aircraft market share to Boeing's turf.

Note: Senior editor Josh Cable contributed to this story.

European aerospace giant EADS NV on Monday took the commercial battle with Boeing to American soil, unveiling plans to assemble Airbus airliners in Mobile, Ala.

EADS (IW 1000/56), the parent company of Toulouse, France-based Airbus SAS, said it will build a manufacturing facility at the Brookley Aeroplex in Mobile, Ala., to assemble and deliver A320 airliners.

The plant -- the first Airbus production facility in the United States -- will employ 1,000 people.

"The time is right for Airbus to expand in America," said Fabrice Bregier, Airbus president and CEO, during a ceremony Monday in Mobile. "The U.S. is the largest single-aisle aircraft market in the world -- with a projected need for 4,600 aircraft over the next 20 years -- and this assembly line brings us closer to our customers."

The facility will assemble the Airbus A319, A320 and A321 aircraft.

Construction of the assembly line will begin in summer 2013, with aircraft assembly expected to start in 2015.

Airbus anticipates that the plant will produce between 40 and 50 aircraft per year by 2018.

Airbus wants to reduce its production costs by assembling aircraft in the United States, avoiding much of the foreign-exchange risk because aircraft are sold on the international market in dollars but current costs for Airbus are mostly in Europe.

However, Airbus says it is not switching jobs from Europe to the United States, arguing that the assembly of an aircraft represents about 5% of the value of the finished plane. The rest is in the form of contracts with suppliers and sub-contractors.

Airbus Lands on Boeing's Turf

With the new facility, Airbus hopes to compete with Boeing (IW 1000/49) on equal terms -- in the dollar zone -- on price and on production times.

Both Airbus and Boeing have big order books. With current production facilities, they need years to satisfy demand. "In any case, we have to increase the rate of production," said Marwan Lahoud, director of strategy at EADS.

Airbus has gained one advantage over Boeing by deciding in December 2010 to put new engines in its best-selling A320 to offer customers aircraft that consume 15% less fuel than previous models.

The first of the new A320 Neo aircraft should be rolling off the assembly line in 2015, two years before the equivalent aircraft from Boeing, the 737 MAX.

Boeing has campaigned aggressively, succeeding in 2011 in obliging the Pentagon to go back on a decision to use Airbus aircraft to renew its fleet of military refueling planes, in a program worth $35 billion.

Boeing argued that the contract would mean that Airbus would take jobs from the United States to Europe, and attacked what it called illegal support for Airbus from European governments.

However, the World Trade Organization has found that both manufacturers have benefited from excessive government aid.

In Alabama, though, the focus Monday was not on Airbus versus Boeing, but instead on the 1,000 direct jobs and several thousand more temporary construction jobs to be created by the new facility.

"It is truly a great day in the history of the state of Alabama," Gov. Robert Bentley declared Monday morning, alongside Airbus executives and other local and state officials.

" ... This day will shape the future of this region for years to come."

After Bentley's comments, Mobile Mayor Sam Jones said, "It is our commitment to develop a world-class aviation manufacturing center in Mobile, Ala." "When Airbus lands here -- and Airbus has landed here -- we are prepared to take off," Jones said.

'A Real Plus' for Airbus

Germany is the main partner with France in the Airbus program. The German government's coordinator for the aerospace industry, Peter Hintze -- who reproached EADS a few months ago for not creating enough jobs in Germany -- said that a factory in the United States "is a real plus for Europeans in the context of competition with Boeing."

Airbus parent EADS was created as a group 12 years ago in response to a concentration of defense industries in the United States as a result of the end of the threat from the Communist Soviet Union.

EADS is nipping at the heels of Boeing in terms of all commercial and military sales. But it has only a small part of the giant U.S. market for commercial aircraft and a small share of the defense market.

"We have never hidden the fact that our strategy was to increase our industrial presence ... in the United States, which represents the biggest market in the world for aerospace and defense and will remain so for many years, " EADS CEO Tom Enders said.

Another EADS subsidiary, Eurocopter, opened an assembly factory in Columbus, Miss., in 2004.

Two years later it won a contract to supply 345 light Lakota helicopters to the U.S. Army. Eurocopter is now the biggest supplier of non-military helicopters in the United States, accounting for 50% of the market.

In 2011, another EADS company -- Astrium -- which builds equipment for space, bought telecommunications firm Vizada, which has activities in the United States.

At IHS Jane's, analyst Guy Anderson said that an aerospace company wanting to do business in the United States needs to have presence in the country.

He forecast that EADS will target the U.S. markets for frontier protection, cybersecurity and satellite services.

Copyright Agence France-Presse, 2012   

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