Airbus Opens First U.S. Factory, Challenging Boeing on Home Turf

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Airbus in Alabama

Sept. 14, 201501:37

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By Reuters

MOBILE, Alabama - Airbus Group SA, which opened its first jetliner factory on U.S. soil on Monday, does not anticipate taking a hit to aircraft orders from the economic slowdown in China, CEO Tom Enders said.

The $600 million plant in Alabama will help Airbus meet plans to churn out 50 narrow-body jets a month by 2017, up from 42 currently. Airbus is considering lifting that to 60 or more to meet a backlog of more than 5,400 planes.

Enders said he had no concern about a slowdown in demand, including from China's recent economic weakness. If it came, Alabama would not be alone in facing cutbacks, he said.

"We would always do that in a balanced way," he said in an interview at a ribbon-cutting ceremony. "There's no political pressures or anything. But I have no reason that we are slowing down. Our challenge right now is to bring up production."

Airbus Group CEO Tom Enders speaks during the inauguration of Airbus' first U.S. manufacturing facility in Mobile, Alabama, on Monday.NICHOLAS KAMM / AFP - Getty Images

China in June placed a landmark order for dozens of Airbus wide-body jets, a deal worth at least $11 billion that paves the way for a second European aircraft plant in the world's fastest-growing aviation market.

China also is a major buyer of narrow-body Airbus aircraft, and Airbus has built a factory in China to produce those planes, similar to the one opened Monday in the United States to serve the North American market.

Rival Boeing has indicated it is looking at building a facility in China to paint and finish its competing 737 narrow-body jets, and could announce it later this month when Chinese President Xi Jinping is due to visit Seattle.

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While Airbus' Alabama plant is crucial to meeting production targets, its larger significance is symbolic, said Barry Eccleston, president of Airbus Americas Inc. Much like foreign automakers who have set up factories in U.S. states, Airbus hopes that the plant will help it sell to American customers.

The company is aiming for 50 percent of the U.S. market. Its current order book will take it to 40 percent, up from 20 percent before the factory, and Airbus' newest single-aisle models, were announced.

Airbus expects to deliver the first U.S.-made A321 aircraft to JetBlue early in the second quarter of 2016, Eccleston said. A second A321 for American Airlines Group will be delivered later in 2016. The A321 is the largest model in the Airbus A320 narrow-bodied family and competes with Boeing Co's 737.

In the interview, Enders said the U.S. plant, which employs 260, could help with military sales.

"This factory certainly has a lot of industrial credibility," he said. "So should an opportunity arise on the military side some years from now (the factory and workforce) will certainly not hurt our credibility."

Airbus said it sited the Mobile plant on 116 acres and has an additional 116 acres available nearby for expansion.

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Airbus aims to make the U.S. factory its most cost efficient plant. But the bigger payoff is with burnishing its brand as a U.S. manufacturer.

Monday's ceremony included video clips praising Airbus from dozens of U.S. elected officials, airline heads and manufacturing companies.

"The relationship (with Airbus) is already extremely strong," American Airlines Group chief Doug Parker said in a clip. "But them being here doesn't hurt."