SAN DIEGO (Reuters) - Airbus (AIR.PA) expects to have access to European export credit financing on a “case by case” basis in 2017, its sales chief said on Monday, granting it a respite from a series of setbacks.
European Export Credit Agencies (ECA) suspended financing for Airbus deliveries in 2016 amid a UK investigation into discrepancies in paperwork over the use of intermediaries.
“I would be expecting that we will get ECA cover on a case-by-case basis this year,” John Leahy, chief operating officer for customers said in an interview on the sidelines of the ISTAT Americas air finance conference.
Covering a range of topics on the sidelines of what could be his last such meeting before retiring around the turn of the year, Leahy said Airbus would need until at least 2018 to recoup production levels it had originally planned for its A320neo jet following production problems at engine maker Pratt & Whitney.
“I think Pratt has been frustrating. We are certainly capable of delivering the airframes the moment we have engines. The good news is the engine is meeting and exceeding our expectations,” Leahy told Reuters.
Airbus delivered 68 A320neos in 2016, well below earlier expectations, and predicts it will treble this number in 2017.
Industry sources say deliveries of the new Pratt & Whitney Geared Turbofan engine to Airbus and Canada’s Bombardier (BBDb.TO) fell as much as 50 percent below the original plans in 2016, raising questions over how quickly it could catch up.
That has implications for the penalties that planemakers may continue to have to pay to airlines beyond 2017 and that they will in turn want to recoup from the U.S. engine maker.
Leahy confirmed the overhang of late deliveries caused by missing engines would persist into 2018.
“We will still be cumulatively behind by the end of 2017 but we will still be in the process of catching up. We can always hope that they will do more, but at this point their track record isn’t that impressive.”
Pratt & Whitney has acknowledged the industrial problems in two parts inside the engine and production of its front fan blades, but says it is well on the way to resolving them.
“We will execute and get this behind us,” sales chief Rick Deurloo told the conference.
A320 snags and high early costs for its A350 helped push Airbus margins down last year, despite higher deliveries and lower spending on research and development.
Analysts say profits have also been squeezed by the legacy of lower pricing for an earlier version of A350, which was relaunched in 2006 with a bolder design and higher price tag.
Some of the airlines taking A350s are those such as Finnair which had ordered the earlier version and believed to have been granted permission to change to the new design at the same price. In all, Airbus sold more than 100 of the earlier version, a derivative of its A330, before opting for an all-new design.
“We did honor some firm contracts that people had for the original airplanes,” Leahy told Reuters, asked about the impact of the pricing switch, adding: “We are almost through it”.
Airbus is also still studying a possible larger A350-2000 version, but is in no hurry, Leahy said.
“We are studying it but this market right now is soft for wide-bodies, so I don’t see a big queue of customers saying I want to launch a new program ... We have time to study it.”
The A350-2000 is a 400-seater designed to compete with Boeing’s 777-9, whose development the U.S. company’s marketing chief Randy Tinseth said was ahead of schedule.
In a setback to the A350-2000 idea, Singapore Airlines (SIAL.SI) placed a big order for 777-9s last month.
Reporting by Tim Hepher; Editing by Bernard Orr