March 28, 2016, © Leeham Co.: The first US-built A320ceo family member took to the skies for its first flight last week. The A321ceo, destined for JetBlue, is the first assembled at the new Airbus A320 plant in Mobile (AL).
This is a milestone for Airbus, obviously. The Mobile plant was first proposed as the assembly site for the KC-330 MRTT (Multi-Role Tanker Transport) proposed for the US Air Force to replace the aging Boeing KC-135s. Northrop Grumman, which paired with Airbus parent EADS (as it was then known) to offer the KC-330, won the contract. The celebration was short-lived. The Government Accountability Office overturned the award. Northrop bowed out of the next round of competition, which Boeing won.
Airbus subsequently decided to create an A320 assembly site at the same Mobile location planned for the KC-330. (I visited the site for grand opening last September.)
This is the fourth A320 assembly site, after Toulouse, Hamburg and Tianjin. Airbus hopes the Mobile site will help spur sales in the US, where it still trails Boeing in market share.
Milestone for US Aerospace
While this plant is a milestone for Airbus, it’s a milestone on a much more macro level, too. This is the first commercial airplane assembly site by a second airplane manufacturer since Boeing closed the McDonnell Douglas MD-11 and MD-95 (aka Boeing 717) assembly lines in Long Beach (CA) in 2000 and 2006, respectively. The last legacy MDC assembly site, for the military C-17, closed early this year.
Initially, Airbus plans to ramp up production to 4/mo. The plant has the capacity to go to 8/mo, a likely prospect. There is enough land around the plant to dramatically expand production of the A320 Family, or theoretically locate a wide-body assembly site there (less likely).
The A320 plant will become a magnet for development of another aerospace cluster in the USA. Just as Boeing’s Charleston (SC) 787 assembly plant is growing as the hub of a new aerospace cluster, so will the Mobile plant. This is good for American jobs and American aerospace.
Washington’s suppliers should expand to Mobile
Here in the Seattle area, where I live, the companies in the state’s aerospace clusters should be aggressively seeking to expand to Mobile. Many already supply Airbus. By company count, Washington State is Airbus’ #2 supplier in the US. Certainly Boeing is keeping these suppliers busy, too. The 737 and 787 production rates are going up. But the 777 Classic and 747-8 rates are coming down. Many believe the Classic rates will have to come down further in the near-term as sales slow in advance of production for the 777X, which begins in 2018. The future of the 747-8 seems bleak, with few deliveries scheduled this year and next and none thereafter except for Air Force One replacements.
Our suppliers need to plan long-term with the expectation that tying their futures to Boeing isn’t a wholly safe bet. When the 747-8 program terminates—something I think happens in 2018, after AF Ones are delivered—there will be a big, gaping hole in Boeing’s Everett plant. Overhead for this space will have to be reallocated among the 777, 787 and 767F/KC-46A programs. The Department of Defense just last week cast doubt on Boeing’s ability to deliver 18 KC-46A on schedule next year and predicted another cost overrun that Boeing has to absorb.
The overhead and cost overruns mean that Boeing will continue to put the squeeze on suppliers to cut costs.
MOM looking less certain
The prospect of suppliers benefiting from development of a new Middle of the Market airplane that could be launched in 2017 or 2018 seems to be looking less certain. Momentum for this airplane appears to be slowing as the business case looks more and more iffy.
Development of a new, clean-sheet replacement for the 737 is unlikely to be launched before 2022 at the earliest.
So Washington suppliers need to begin now (really, even earlier) to plan for the future. Getting in on the Airbus Mobile plant aerospace cluster is their best opportunity.