UPDATE 3-Airbus to boost output as outlook brightens

Fri Jul 30, 2010 9:17am EDT

* Airbus to increase single-aisle production to 40/month

* Parent EADS increases revenue, order, delivery forecasts

* Currency hedging hits profit in H1

* EADS shares up 2.4 percent, bucking weaker market

(Recasts; adds BA results, background; updates shares)

By Tim Hepher and Matthias Blamont

PARIS, July 30 (Reuters) - Planemaker Airbus dusted off plans to increase output of its most popular jetliners after a stream of new orders brought fresh signs of a dying recession.

Friday's move by the world's largest civil planemaker comes as rival Boeing (BA.N) also considers a production hike to meet resurgent demand, though it has expressed uncertainty about whether its network of suppliers was ready to keep up.

Airbus EAD.PA said it had discussed with its suppliers, most of whom also supply Boeing, its goal of increasing production of its A320 narrow-body planes in various stages to 40 a month by first quarter 2012 from 34 a month a present.

The goal revives a plan first outlined in May 2007 for the most ambitious production schedule attempted in civil aviation -- and would ultimately result in a completed passenger jet rolling off its French or German assembly lines every 6.7 working hours.

Aviation went into a steep nosedive after the financial market collapse in 2008, with airlines going bankrupt and orders for new planes falling sharply.

However, deliveries of new aircraft ordered during an earlier boom held up relatively well and increases in traffic have brought buyers back into the market.

Planemakers bagged orders by the dozen at last week's Farnborough Airshow, particularly from leasing companies whose speculative decisions often anticipate the economic mood.

EADS Finance Director Hans Peter Ring said the industry was growing more confident as airlines in emerging markets also step up to buy. However, he cautioned that major economies like the United States did not yet have a clear-cut recovery.

"Where we were cautiously optimistic, we could say we are (now) optimistic, but we still have to be vigilant," he said.

Airlines are reporting better returns and European aerospace firms are cashing in on a weaker euro which helps them export -- even though EADS is paying a price for having hedged most currency risk when it felt threatened by a strong euro.

"Airline yields have recovered, the dollar is stronger and the financial sector has stabilised, so all of that goes in the right direction," Finance Director Ring told reporters on a conference call.

Shares in Airbus parent EADS rose as much as 5 percent, making it the second-biggest gainer among French blue chips .FCHI. At 1306 GMT, they were up 2.4 percent at 18.0 euros. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on how EADS compares with other aerospace firms

link.reuters.com/bax42n ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

STRONG BACKLOG

Investors' sentiment was boosted by sweeping upward revisions in group financial forecasts, despite profits having halved in the first half due to weaker currency hedge rates and higher research and development spending.

EADS predicted a total of 500 Airbus plane deliveries this year, edging past last year's record 498. It upped its forecast for new jetliner orders by a third to more than 400 this year after bumper orders at Farnborough and a Berlin show in June.

However, deliveries at Airbus sister firm Eurocopter were seen likely to fall slightly and civil helicopter orders remain slack. EADS is also still worried about the growing cost of the Airbus A380 superjumbo, which is struggling with lengthy delays.

The firm raised its annual revenue forecast to 44 billion euros after previously aiming to match last year's 42.8 billion, and predicted 1.2 billion euros in core profit before one-offs.

Boeing is targeting a total of 460 to 465 deliveries this year. Last month, it announced plans to increase production on the popular 737 narrow-body jet to 35 a month in early 2012.

Still, a question mark lingers over whether the aircraft supply chain can support increased aerospace output, the head of Boeing's commercial unit said last week. [ID:nN18172134].

Problems in the supply chain have been partly blamed for delays in developing Boeing's new 787 Dreamliner.

Boeing Chief Executive James McNerney told investors this week he aimed for a decision on output in the early autumn.

Meanwhile, both planemakers, who have a duopoly over sales of jetliners with more than 100 seats, are considering whether to upgrade their most-sold lines of aircraft with new engines.

Airlines are growing more confident as economic recovery takes hold, with performance at pre-crisis levels and expectations of profitability rising, IATA said on Tuesday. [ID:nLDE66J0UT]

British Airways BAY.L posted wider-than-expected quarterly losses on Friday but predicted breakeven for the year. [ID:nLDE66T09J] (Editing by Geert De Clercq, Simon Jessop and Karen Foster)

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