What might have been one of the worst kept secrets in manufacturing is official: Airbus SAS will open its first U.S. assembly facility, in Mobile, Ala.
"The time is right for Airbus to expand in America," Airbus President and CEO Fabrice Bregier declared Monday morning during a jubilant news conference at the Arthur R. Outlaw Convention Center in Mobile.
Following days of rumors in the press, Bregier and Alabama Gov. Robert Bentley on Monday formally signed an agreement that will bring 1,000 jobs and a $16 million Airbus final assembly facility to the Brookley Aeroplex in Mobile.
It also could bring a world of headaches to archrival Boeing Co. (IW 1000/49) in the commercial-aircraft space.
The Mobile plant, expected to begin production in 2015, provides several benefits to Airbus, said Issaquah, Wash.-based aerospace analyst Scott Hamilton: It provides a hedge against the dollar-euro exchange rate, and it gives Airbus an assembly facility with lower labor costs than other Airbus plants in Hamburg, Germany, and Toulouse, France.
But the biggest benefit of the new facility, asserted Hamilton, will be the added production capacity.
Both Airbus and Boeing are sold out on their bread-and-butter single-aisle jets -- the Airbus A320 family and the Boeing 737 family, respectively -- through the end of the decade. Airbus expects the Mobile facility to have an initial capacity of four planes per month, with the potential to ramp up to eight planes per month.
"And what this plant will do will be to open up production slots that otherwise just aren't there," Hamilton told IndustryWeek. "So Airbus now can go out and offer earlier delivery positions to any airline worldwide.
"Up to this point, [Airbus plants in] France or Germany have had to be the suppliers to fill the U.S. airline orders. So now Mobile comes online and instead it fills the U.S. airline orders, and that frees up an equivalent number of slots in France and Germany to fill orders elsewhere in the world."
That puts Boeing in a tough spot.
The aircraft maker now has two options, Hamilton said. One is to boost production of the Next-Generation 737 in Renton, Wash., to more than 42 planes per month to match Airbus's global production capacity. (Boeing has said that it plans to ramp up production from the current rate of 35 per month to 42 per month by early 2014.)
The other option is to "start dropping prices on airplanes."
"They're already engaged in a price war as it is," Hamilton added.
NEO vs. MAX
The Alabama facility also has implications for the battle between the aerospace giants' re-engined airplanes: the Airbus A320 NEO and the Boeing 737 MAX.
Boeing already has 451 firm orders for the 737 MAX, and expects deliveries to begin in fourth-quarter 2017. Meanwhile, Airbus has more than 1,400 orders for the A320 NEO, and expects deliveries to begin in late 2015.
The new Mobile facility means that "Airbus will be able to start offering more NEO positions sooner than Boeing can even put the MAX into service," Hamilton said.
"This gives Airbus a major opening to offer the NEO to 737 and 757 operators who need fuel-saving airplanes long before Boeing can hope to offer them," Hamilton wrote in his blog.
That could trigger a decades-long shift in market share in favor of Airbus -- "until either Airbus or Boeing design and introduce a new small airplane that has major technological advances," Hamilton wrote.
'A Gamble that Boeing Lost'
There are other benefits to Airbus having a manufacturing presence in the United States that, while secondary, could be significant in the future.
During the competition for the Air Force refueling-tanker contract, officials from Airbus and parent EADS NV (IW 1000/56) had said they would establish a plant in Mobile to manufacture the KC-X tanker, hoping to strengthen their case.
While ultimately Boeing won the contract on an appeal, Hamilton believes that EADS/Airbus can leverage the new Alabama factory in future bids for U.S. defense contracts.
If the Mobile site plays even a small role in wooing the Defense Department to award a contract, it would be a double whammy for Boeing, which "pulled out all stops to defeat EADS the second time for the KC-X," Hamilton said in his blog.
"Boeing gambled that once the tanker was dead, so was the prospect of [a U.S.-based final assembly line]," Hamilton wrote. "It was a multibillion-dollar gamble that Boeing lost."
