Taking Aim at Boeing, Airbus Opens First US Plant

Mobile, United States: European jetmaker Airbus inaugurated its first US plant on Monday in a move to wrest away a chunk of Boeing's domination of the domestic aircraft market including lucrative Pentagon contracts.

Airbus plans to assemble 40-50 of its single-aisle A320 family every year beginning in 2018 from the plant, built on the site of a World War II bomber support base in Mobile, Alabama.

Decking out the location with US flags, the European industrial giant hopes the "Made in America" stamp on its aircraft will help carve a larger chunk from Boeing's dominance of the North American market for passenger aircraft.

"It's a historic day," said Airbus chief executive Fabrice Bregier.

"Having an assembly line in the United States will increase our visibility."

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With loudspeakers blasting out the 1974 rock anthem "Sweet Home Alabama" at Monday's ceremony, Governor Robert Bentley called it "a great day for Mobile and all the state of Alabama."

Three years ago, Airbus had a 20 percent share of the US market, against 80 percent for Boeing. Since announcing the Mobile plant, its market share has doubled to 40 per cent.

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The company, based just outside Toulouse, France, is focused on the estimated 5,000 new passenger planes expected to be ordered in North America over the next 20 years.

But another important aim of the new facility is greater access to the huge US defense budget. Airbus's identity as a foreign maker helped undermine its fight in 2011 against Boeing for a $30 billion Pentagon contract for air refueling tankers.

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The $600 million production line is only Airbus's second one outside Europe -- the first is in Tianjin, China.

"While Airbus has deep European roots, we have always seen ourselves as citizens of the world," Bregier said at the inauguration ceremony.

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"Thanks to Mobile, the sun will never set on Airbus."

Lower Labor Costs

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The company expects the new plant, which will employ 1,000 workers in the final assembly of the aircraft, to help reduce production costs and make them more competitive price-wise.

Alabama has one of the lowest minimum wages in the United States -- $7.25 per hour -- and employment benefits are about 30 per cent less expensive than in Europe.

In addition, by producing in the United States, Airbus will reduce risks tied to the shifting US-euro exchange rate.

The Mobile plant will assemble single-aisle A319, A320 and A321 jets, its best-selling aircraft first launched in 1988.

Starting in 2017, it will also assemble the A320 Neo, a new version with a more fuel-efficient engine.

The first aircraft are scheduled to roll off the assembly line in early 2016, destined for US carriers JetBlue and American Airlines.

Airbus hopes to produce four planes per month starting in 2018, but will have the capacity for eight a month.

Besides the currency protections, the new plant helps Airbus competitively in two other ways, said Richard Aboulafia of aerospace industry consultant Teal Group.

"It gives them a larger industrial presence, which could be useful in pursuing defense contracts. It puts pressure on trade unions back in Europe, because labor in Alabama costs less," he said.

Hans Weber, president of aviation consultant Tecop International, said the defense angle is particularly important, especially since European governments have cut back their military procurement.

The United States accounts for about 35 percent of global defense spending.

"Competing in the US defense sector has a very strong public component to it. It really means that you would have to look as much as you can like an American company," Weber said.

"There were some competitions they did not even participate in because they realized they did not have the political strength here to be successful," he noted.