Military
Does It Matter That Airbus Now Delivers Airplanes From 3 Continents?
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On Friday, European aircraft maker Airbus will hand over the first of its A320 single-aisle jets built entirely in the United States to Spirit Airlines Inc. (NASDAQ: SAVE). The company’s plant in Mobile, Alabama, began operations in 2015 and delivered its first A321 single-aisle plane to JetBlue Airways Corp. (NYSE: JBLU) in April 2016.
With this first delivery, Airbus becomes the first aircraft maker to build and deliver new aircraft from three continents: Europe, Asia and North America. As a company spokeswoman put it in an email to Bloomberg News, “The sun never sets on Airbus manufacturing.”
Meanwhile, Boeing Co. (NYSE: BA) broke ground just a few months ago on an interior completion center near Shanghai for its 737 MAX single-engine jets that are destined for Chinese airlines. Boeing has three plants in the United States, two in Washington state and one in South Carolina.
Does the first Airbus delivery from Mobile indicate that the European company has stolen a march on Boeing?
Boeing doesn’t think so — or at least the company acts like it doesn’t think so. The amount of work on a new airplane that Boeing will be sending to China is relatively minor — about 4% to 5% of the total value of the aircraft. The other 95% or so of the value is comprised of the airframe, engines and other systems, according to industry analyst Richard Aboulafia of Teal Group.
The U.S. share of the global airplane market (military, commercial, business jets) is right at 50% and has been for a long time. Not only that, U.S. aircraft makers are more profitable than their foreign competitors.
Boeing sources components from all over the world and is entangled in a global supply chain that could be seriously damaged by some of the proposals that have been batted around regarding U.S. trade policy. With most of the value-added work on Boeing jets done in the United States, the value of the company’s exports (about 85% of its direct and indirect (to lessors) sales) to Boeing shareholders and to the U.S. trade balance should not be underestimated.
Airbus has chosen a different tack. The final assembly plants in the Alabama and China are intended to fulfill orders for Airbus jets in their respective countries, forecast to be the two largest customers for new airplanes over the next 20 years. With roots now firmly planted on three continents, Airbus has achieved the global industrial footprint it sought. It remains to be seen if it was worth the time and expense.
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