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Airbus steps up pressure on suppliers over Canadian jet

Reuters  |  MONTREAL 

By Tim Hepher

(Reuters) - Europe's is ratcheting up pressure on suppliers like to cut costs for its Canadian-developed jetliner as it expands factory facilities to cope with anticipated demand for the former model.

Long seen as low on the list of priorities for top suppliers as struggled to break into the main market, the now has the clout of the world's second largest planemaker behind it after bought the loss-making project last year.

Philippe Balducchi, of an Airbus-led venture which took over production last July, said the planemaker was looking for a "significant double-digit" percentage reduction in costs but played down suggestions that it could slash costs by half.

Speaking at the Mirabel airplane plant outside which now shares with Airbus, Balducchi indicated the bulk of the reduction in costs would come from the as uses its greater clout in negotiations for parts.

Other savings would come from more efficient operations as workers gain experience of building the lightweight 110-130-seat jet, whose deliveries doubled to 33 last year.

However, overall economies will go "way beyond" what Airbus can achieve internally on the assembly line, Balducchi said.

"Our focus is to sell, ramp up (production) and reduce costs on the A220," Rob Dewar, of engineering and customer support, added during a on the jet, which was known as the CSeries until Airbus took control in July 2018.

Cutting costs is key to lifting the programme out of the red while avoiding a repeat of reportedly low prices that fanned trade tensions between the and in 2017.

Airbus rival claimed sold airplanes to at unfairly low prices but later lost its complaint.

SUPPLIER LEVERAGE

Airbus declined to discuss but analysts have said it faces a showdown over costs with United Technologies, whose unit supplies make it by far the largest supplier.

"It depends how you define significant, but it will be a difficult task," said Scott Hamilton, noting that is emerging from its own industrial problems.

"Pratt is going to be reluctant to give concessions, but Airbus has some pretty good leverage," he added.

To maximise its clout, Airbus waited until winning a batch of new orders for the jet before turning up the heat on suppliers, grabbing their attention with sales of 135 of the planes to U.S. airlines including a follow-on order from

"That was the strategy, to get the sales first. Now you can go to suppliers and say look, this is real," said one

The A220 consortium, which also includes Bombardier and the government, is spending $30 million to expand the and will break ground this week on a new A220 assembly line in to meet demand from U.S. airlines.

It plans to raise Mirabel capacity to 10 A220s a month by the middle of next decade, with four a month in - though for now about half of the known orders are from the

Airbus meanwhile said the jet had won approval to fly up to three hours away from the nearest airport in the event of a shutdown of one of its two engines, a safety standard which supports its use on longer-range routes.

Extended operations or approval was granted by and affects the number of routes jets can fly over water or remote areas. U.S. and European approvals are pending.

(Reporting by Tim Hepher; Editing by and Jan Harvey)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, January 15 2019. 01:52 IST
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