Airbus CEO Fabrice Brégier said the company expects its profit margin to more than double by 2015, the Wall Street Journal reported, as the aviation major prepares to compete with Boeing for orders at the 2013 Paris Air Show, set to open on Monday.
Brégier, who completes one year at the helm of Airbus this month, said in an interview with the Journal that he was confident about increasing the operating margin within two years to 10 percent, without counting the one-time cost of the A350 jetliner launch.
Airbus is expected to announce many new contracts at the world’s biggest air show, and has already gained an edge over its American rival, Boeing, with a successful maiden flight of its new A350 plane on Friday. The two-engine intercontinental plane is expected to be ready for customer delivery late next year, after several rounds of testing.
Also, industry sources told Reuters on Sunday that Airbus will soon land an order from the International Lease Finance Corp, a unit of lessor American International Group Inc. (NYSE:AIG) and one of the world’s leading aircraft leasing companies, for 50 A320neo narrow-body aircrafts valued at $5 billion at list prices.
According to Boeing, the market for mid-sized long-haul passenger airplanes will be worth $1 trillion over the next 20 years, and Airbus' A350 and Boeing's own troubled Dreamliner, are working hard to grab a bigger slice of that market, Reuters reported.
Airbus expects to boost production of A350 planes quickly, which would bring in more revenue but would also involve high upfront costs.
Airbus’s parent, European Aeronautic Defence & Space Co.(EADS.FR), follows a model of booking all costs for its aircraft programs in the year they occur, unlike Boeing’s model of distributing them across the program, according to the Journal.
Airbus has positioned the A350 to exploit the market between Boeing’s 777 and the 787 Dreamliner, and promotes it by comparing the A350’s fuel efficiency to Boeing's creations.
Airbus already has orders that convert to eight years of production and is expected to book more than 800 new orders this year, but Brégier said, “the first priority is to execute on this order book.”
Changing the company's highly structured culture, according to Brégier, by giving factory managers more autonomy was critical for achieving greater efficiency. Each plant “is now like a small business,” he told the Journal.
Brégier said his efforts to simplify operations by funneling down people involved in the decision-making process are “starting to pay off,” after Airbus delivered 247 planes in the first five months of 2013 -- a 10 percent increase from its performance in the corresponding period last year, the Journal said.
Gayathri writes about geopolitics and business for International Business Times. She began her career at the Times of India as news coordinator, before moving on to IBTimes...