Airbus seeks to unlock US commercial jet market with new factory

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When aircraft components start arriving at the vast new Airbus assembly plant in Mobile, Alabama, they will be stored at least two days before being assembled into commercial jets.

The pause is required to ensure that the parts, manufactured in the Toulouse-based company’s European factories, can cool and resume their original shapes after exposure to the US Gulf coast’s humid, subtropical heat. Expensive air-conditioning and dehumidifying equipment for the 850ft-long building will hurry the process along.

However, the factory – being built on the sandy soil of a former US air force base – will provide Airbus with more than a climatic link between its European base and North America.

The company hopes its $600m investment in Mobile – Airbus’ first final assembly line for narrow-body passengers jets in the US – will cement relationships with North American airlines and leasing companies. That could push up its meagre 20 per cent share of the US narrow-body market dominated by Boeing, its US-based rival.

The question is whether the greater proximity will encourage US customers to give more orders to Airbus than if it continued serving the market exclusively from Europe.

Allan McArtor, chief executive of Airbus’ operations in the Americas, acknowledges US airlines are unlikely to choose the European manufacturer solely because the aircraft would be assembled on US soil. But he says in an interview with the Financial Times: “They’re delighted with the idea that it can be assembled in the US, so it does have an impact.”

Boeing retorts that, based on its experience, success is a result of the value of a company’s products, the quality of its employees and relationships with customers, not where a product is manufactured.

Mr McArtor points out that, when non-US carmakers have started production in the US, their market share has gone up. He anticipates a similar effect for Airbus, saying: “We expect it to have a positive impact on our market share.”

Airbus will certainly pay a price in additional complexity in its operations, whether or not the investment brings in more orders. The company selected the Mobile site – which it initially acquired for its lost contract to build refuelling tankers for the US air force – because of its proximity to the Port of Mobile and other transport corridors. Ships will bring to Mobile parts of fuselages, wings and other components constructed at Airbus’s dispersed network of European factories in France, Germany, Spain and the UK.

Boeing’s commercial jet manufacturing facilities in the US – mostly concentrated in Renton, Washington – are far simpler.

Mr McArtor insists, however, the lower costs for some items – particularly wages – will offset the extra expenses the company will incur from manufacturing in the US.

“Our transportation costs will be a little higher,” Mr McArtor says. “Our wage costs will be lower, and our productivity should be higher in Alabama just because the number of days worked per year is higher.”

Loren Thompson, analyst at the Virginia-based Lexington Institute, expects one of the Mobile factory’s most profound effects to be that politicians representing Alabama and states with big Airbus suppliers will start lobbying for the company.

“Airbus will acquire more influence in Congress as its domestic manufacturing footprint grows, not only in Mobile but in places where local suppliers are located,” Mr Thompson says.

For the moment, however, the challenge is to prepare the factory in time for work on the first aircraft to start as early as next year. That aircraft is due to be delivered to JetBlue, the low-cost airline, in April 2016.

Work has proceeded fast since the decision to build the factory was announced in mid-2012 – the first steel piles went into the site’s loose soil in September last year and there are 450 workers on site, completing the main assembly building’s interior.

Airbus needs the extra capacity at Mobile as it intensifies production of its narrow-body workhorse – called the A320 – in response to strong demand. Notably, Airbus is preparing to make a new version featuring more fuel-efficient engines, known as the A320neo, or new engine option.

The newness of the Mobile factory should generate significant advantages compared with the company’s mostly older facilities elsewhere, according to Mr McArtor – the building site will be transformed into one of the world’s most up-to-date final assembly lines for jets.

“We expect it will be the most streamlined and best-designed final assembly plant we have ever had,” Mr McArtor says.

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