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Airbus Reportedly to Keep Production Rates Steady

By Lou Whiteman – Updated Sep 24, 2020 at 2:59PM

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A second round of cuts was considered as Europe has experienced a second wave of the coronavirus pandemic.

Airbus (EADSY -2.58%) has reportedly decided to keep production rates steady despite a second wave of coronavirus cases that is causing European nations to reinstate travel restrictions, diminishing any hope for a quick aviation turnaround.

Earlier this year, Airbus cut output on its top-selling A320neo to 40 planes per month from 60, and the company launched a new internal review to consider deeper cuts since it has become apparent it might be years before airlines get back to pre-pandemic growth rates. But the company has decided against further cuts, according to a Reuters report on Thursday.

An Airbus A320neo in flight.

Image source: Airbus.

The decision is good news for suppliers that have faced sharp revenue declines as Airbus and Boeing (BA 3.84%) cut back on production. But it threatens to leave Airbus with a glut of planes even as the aerospace giant is having issues placing some of the aircraft already built.

Airbus is partly owned by the governments of Germany and France, which could have added an extra dynamic to the analysis of production rates. Although Airbus has operated as a privately held company in recent years, in the company's early days many of its decisions were influenced by government industrial policy and a desire by elected officials to avoid job cuts.

After the attacks of Sept. 11, Airbus kept production rates elevated and used discounted lease rates to help the A320 gain market share among discount airlines. That could happen again during this crisis, as the 737 Max, Boeing's A320neo competitor, remains grounded following a pair of fatal accidents.

Boeing hopes to get the 737 Max airborne again before year's end, but the company has more than 400 airframes built but not yet delivered and has slowed production forecasts into 2021.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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