Airbus to juggle jet production, defends poor-selling A380

By Tim Hepher and Cyril Altmeyer

TOULOUSE, France (Reuters) - Airbus edged closer towards raising production of its best-selling model on Tuesday, declaring the supply chain stable and hinting at a decision to produce more of its A320 cash cow in coming months.

But it also conceded it may have to reduce production of its wide-body A330 further than previously anticipated, amid waning demand for the current version of the jet which faces competition from Boeing's newer 787 Dreamliner.

The European planemaker is having to adapt to different levels of demand for its most cash-generating jets after beating Boeing in new commercial orders last year, while remaining behind on deliveries.

Fabrice Bregier, chief executive of the main planemaking unit of Airbus Group, said both decisions would be taken in the next few months.

Speaking at an annual news conference, he also defended the double-decker A380, whose future has been left uncertain by a recent dearth of new airline orders.

"The best days of the A380 are ahead," Bregier said, pointing to increases in traffic that Airbus says would require the world's largest airliner. Boeing says airlines prefer smaller twin-engined jets that are easier to fill.

Underscoring the more sombre economic mood which has caught up with a jet launched in 2000, Bregier said the A380 was "not an icon" and any decision about its future would be taken on business grounds.

But officials said there was no serious discussion of cancelling the A380 despite offguard remarks from the company's finance director in December.

Data issued on Tuesday showed that a private A380 ordered by Saudi Prince Alwaleed bin Talal, and which now sits mothballed on the edge of Toulouse airport, had been canceled.

Airbus is expected to decide this year whether to upgrade the 525-seat A380, which is the only wide-body aircraft without a version offering the latest generation of engines but which could also benefit from lower oil prices.

"Airbus will this year decide to upgrade the engines to a new design from Rolls-Royce and add wingtip extensions," predicted Leeham Co analyst Bjorn Fehrm, adding this would help compete with Boeing's 406-seat 777X. Boeing maintains the four-engined A380 is not in the same mould as its largest twinjet.

SUPPLY CHAIN HOTSPOTS

Airbus said on Tuesday that it won 1,456 net orders in 2014, down from 1,503 a year earlier but enough to pass Boeing's total of 1,432. Gross orders totaled 1,796, against 1,550 for Boeing, giving Airbus a 54 percent market share.

Its shares, up 9 percent this month, rose 1.9 percent.

Faced with European labour rules, Airbus has traditionally been more cautious than rival Boeing in tolerating swings in key production of single-aisle A320 jets, even though competition with Boeing is roughly equal on average.

Airbus produces 42 A320-family jets a month and is targeting 46 a month. Boeing has set plans for 52 a month and industry sources say it has started sounding out suppliers on whether they could support as many as 58.

Airbus sales chief John Leahy told journalists he preferred "a rate above 50 as soon as possible".

Chief Operating Officer Tom Williams told Reuters there were still "hot spots", areas of operational vulnerability, in seats and galleys, which have hampered the industry in recent months.

Bregier said there was a debate between the sales and production sides about how quickly to increase production of the single-aisle A320 jets, which are also in the midst of being upgraded.

But strong sales of the existing version had prepared the ground for an increase, probably in 2016, he said.

"When we are ready, and clearly in the first half of 2015, we will give you the new production plan if and when it is decided," Bregier said.

On the A330, Bregier said he expected more orders soon but not enough to avoid lower production after 2015. "To which level will depend on the market conditions and the (sales) campaigns and we will also tell you probably in a few months."

Airbus produces 10 A330s a month and plans to trim this to nine. Analysts believe it could have to cut to as few as six a month.

(Writing by Victoria Bryan; Editing by James Regan/Keith Weir)