* Airbus seen lifting A320 production rate above 50 a month
* Suppliers not yet ready to handle output as high as
* A320 jet production generates cash for larger projects
* Airbus said to mull 'A350-1100' with Rolls-Royce Ultrafan
* Prospects for quick Airbus A380 upgrade clouded by costs
(Adds share reaction, analyst quote, wide-body developments)
By Tim Hepher
PARIS, Oct 29 European planemaker Airbus
is poised to increase production of its best-selling
A320 jet after reaching a compromise with suppliers over the
capacity of the supply chain, people familiar with the matter
The decision, which could be announced as early as Friday
alongside quarterly results, would push output of the
cash-generating jet beyond its latest target of 50 a month, but
fall short of recent expectations of a new goal of as high as
Airbus declined to comment.
Shares in the planemaker were up 1.85 percent at 60.70 euros
by 1444 GMT, having risen earlier on news of the sale of 130
planes to China.
Airbus sees strong demand for the 27-year-old narrowbody
design as it introduces an upgraded version with mor
But it was forced to scale back its ambitions after engine
makers General Electric and Safran said in June
they would not be ready to support Airbus's request for
production as high as 63 a month until their own suppliers had
demonstrated they could cope with previously planned increases.
France's Safran said last week the ramp-up in production of
the new LEAP engine, co-produced with GE through their CFM
International venture, was "progressing very well".
Speaking on Oct. 22, CEO Philippe Petitcolin did not rule
out an increase, saying "it is hard to say no to a customer" and
that talks with Airbus continued.
Rival Pratt & Whitney, whose engines also power the
A320 family, has not waded into the public debate but is also
said to be concerned about over-stretching the supply chain.
The decision to go ahead with an increase in output reflects
strong demand and could allay concerns about cash generation
caused by a slowdown in production of the larger A330, while
putting pressure on rival Boeing to follow suit.
However, RBC Capital Markets analyst Rob Stallard said a
sharp increase "may bring narrowbody oversupply onto the agenda,
especially if Boeing decides to match this rate increase".
CASH FOR DEVELOPMENTS
In February, Airbus Group said it would increase A320
production to 50 a month from first quarter 2017.
It currently builds around 42 a month, but industry sources
say it is already selling aircraft in anticipation of a further
hike above 50 a month, even after building in a margin of
overbooking to protect against cancellations.
Boeing is increasing production of its competing 737 to 52 a
month in 2018 from 42 now.
With a roughly equal share of the busiest part of the jet
market, both planemakers rely on their smallest planes for cash
to finance riskier developments of larger jets. Airbus also
faces continued pressures from its delayed A400M military plane.
Airline sources say Airbus is exploring more seriously than
before a larger version of its A350-1000 widebody jet with a
capacity of up to 450 seats to counter the latest Boeing 777,
probably powered by the next generation of "UltraFan" engines
At the same time, they say it may hold off on upgrading its
slow-selling 544-seat A380 as it gains a clearer idea of costs,
keeping open the option of producing an even bigger version
later with 100 more seats to keep a gap with the A350 and 777.
That decision too is seen as key for Rolls-Royce, whose
Advance engine technology could be used for any A380 upgrade.
Wide-body gambles, bankrolled by A320 and 737 production,
are expected to be discussed at next month's Dubai Airshow,
though Gulf airlines have played down the prospect of large new
Dubai's Emirates has been pushing Airbus for a commitment to
build a re-engined "A380neo" but most analysts do not expect any
decision to be announced at the Nov 8-12 event.
(Editing by Mark Potter, Greg Mahlich)