Airbus says may have to cut A380 production further

CANCUN, Mexico (Reuters) - Airbus AIR.PA, Europe's largest aerospace company, raised the prospect on Monday of a new cut in production of its A380 superjumbo because of weak sales but pledged to try to make sure the struggling project still breaks even.

An Airbus A380, the world's largest jetliner, participates in a flying display during the 51st Paris Air Show at Le Bourget airport near Paris, June 15, 2015. REUTERS/Pascal Rossignol

Airbus already plans to cut production to one superjumbo a month in 2018 from an unspecified level now and has said it needs to win more sales this year to maintain output at that new level, called rate 1 by the company’s executives.

At the same time, Airbus is trying to reduce its industrial costs to prevent financial losses, pending what it believes will be an upturn in sales as global air traffic continues to grow.

“My first job is at least to adapt to the assumptions that we have for rate 1 in 2018, which is being done,” Programmes Head Didier Evrard told reporters.

“Doing that is our first goal and meanwhile (sales chief) John (Leahy) is trying to sell more to A380 customers.”

Asked whether Airbus could have to cut production again, Evrard said, “Yes, it is likely that we may have to go below rate 1... and we will continue to study opportunities to (make) our program as healthy as possible on the financial side.”

Airbus shares fell 1.1 percent.

Leahy told the same briefing that Airbus was working to reduce the A380 breakeven level to less than one a month.

But he insisted he saw a future for the world’s largest airliner as air traffic continues to double every 15 years.

Both executives were speaking on the sidelines of an annual meeting in Mexico of about 200 airline leaders hosted by the International Air Transport Association.

Airlines have been ordering fewer large four-engined jets such as the A380 and Boeing 747 in favor of smaller but efficient twin-engined models.

Boeing plans to launch a new version of its 737 MAX family, the 737 MAX 10, at this month’s Paris Airshow, though Leahy said it would be a “marginal airplane”.

He confirmed Airbus was looking at enhancements to its rival A321neo model, which has heavily outsold the 737 MAX equivalent, but said it was a routine annual product review.

Leahy said Boeing had a “crisis” in the middle of the market, having ceded it to the A321neo, and he was not worried by the Chicago-based manufacturer’s efforts to develop a new aircraft in the roughly 220-260 seat segment.

After years of booming orders, Airbus expected a “very, very slow” year of orders, he said.

The 67-year-old, who has overseen the sale of more than 10,000 aircraft, said he would step down “sooner rather than later” and that his role would be filled by his current deputy, executive vice-president Kiran Rao.

Reporting by Tim Hepher; editing by David Clarke