Airbus might need European state backing for new aircraft programme to replace A320, chief says

The head of Airbus has said the group “might need some support” from European governments for a new, multibillion-dollar commercial aircraft programme as it gears up for a successor to its best-selling A320 family of jets.

Chief executive Guillaume Faury indicated that Airbus could ask for taxpayer backing – an increasingly politicised issue as governments try to help industry decarbonise – to launch a single-aisle aircraft and a shorter-range, hydrogen-powered plane.

Faury said the European aerospace and defence group had the financial firepower to fund the development of both programmes thanks in part to its strong order book. He added, however, in an interview with the Financial Times: “We might need some support.”

Disputes over state support for Airbus and its US rival Boeing have caused transatlantic tensions in the past. This year European capitals have clashed with Washington over subsidies in Joe Biden’s $369 billion (€342 billion) climate law.

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Airbus is receiving some research funding from European governments to explore technologies for a plane that could replace the A320 narrow-body aircraft in the second part of the next decade. It is also working on a shorter-range hydrogen-powered aircraft expected to enter service in 2035.

Neither programme has yet formally been launched, a process that will require billions of euros in funding.

Faury said he was “very committed” to a previous financing model in which European governments provided loans to build new aircraft, repayable when certain order levels were reached.

He added that such a model – known as repayable launch investment – created a “bigger partnership” between Airbus and European governments.

“We need to find acceptable mechanisms to incentivise private sector investment and share risks with governments in order to support the design and development of new aircraft programmes that will deliver the decarbonisation of aerospace,” he said.

Any new such partnership with European capitals could test a 2021 deal to draw a line under years of transatlantic trade disputes.

Almost two decades of disputes over Airbus and Boeing were resolved by the US-EU agreement. According to this both sides promised that future research and development funding would not harm each other.

Both Airbus and Boeing have since begun work on technology, including alternative wing designs, that could replace today’s best-sellers as pressure on the industry to cut carbon emissions rises.

While Airbus is focused on securing support for its research and technology work, any new funding mechanism for development would have to be agreed before the formal launch of its narrow-body programme, likely to be before 2030.

Airbus’s financial position has been bolstered by a record backlog of orders – more than 8,000 at the end of October – for both single-aisle and twin-aisle aircraft, according to aviation consultancy Cirium.

It said last month that it will deliver 720 commercial planes by year-end, despite persistent supply chain problems.

Faury will relinquish his role as head of the civil aircraft division to Christian Scherer, group chief commercial officer, in January next year. The move is intended to allow him to focus more on Airbus’ strategy and wider operational and geopolitical challenges.

The company is restructuring its defence and space division, which generated close to 20 per cent of group revenues of €58.8 billion in 2022 and has gained prominence since Russia’s full-scale invasion of Ukraine.

Airbus is part of the Eurofighter Typhoon industry consortium and builds the A400M military transport aircraft, as well as satellites. Together with Safran of France, it is also the joint owner of ArianeGroup, the lead contractor on the Ariane family of European rockets.

Faury said he was “not satisfied with where we are on defence and space as a division” while adding that did not mean everything was underperforming.

The division is being reorganised along “business lines” focused on military air systems, space and cyber security. The military air business is performing strongly, Faury said.

He singled out the company’s space activities as an area of concern, noting that “space is very poor in terms of profitability and it is very competitive and it is very difficult to gain the scale effect that we would need to compete against American players”.

There are growing concerns in Europe about how to close the gap with Elon Musk’s SpaceX, which dominates the commercial landscape with its low-cost launch services.

“We need to be able to do more joint ventures, more partnerships [in Europe],” Faury said.

He said he expected it would take three to five years to “get all the benefits” from the reorganisation.

Despite its smaller share of total revenues, the defence and space business was “very important” strategically to Airbus, and responsible innovation that had benefited the whole group, Faury said.

Copyright The Financial Times Limited 2023