Airbus seeks economic, political edge by building U.S. factory

MOBILE, Ala. — European aerospace giant Airbus will start building planes in Mobile, Ala., planting its first factory on U.S. soil and aiming to compete better against archrival Boeing.

Airbus, based in France, said it plans to employ 1,000 people at the plant building its A320s, delivering the first one in 2016.

Airbus cranks out more than 400 of those planes a year, more than any of its other planes. It competes head to head with Boeing's 737. Those planes are the minivans of the airline world: widely used people-haulers generally flown on short- and medium-haul trips.

North America is the biggest single market for that type of plane, Airbus executives said, and they want more of it. Right now, Boeing's 737 has an advantage, with Southwest and Alaska Airlines buying only 737s.

"We needed to be visible in the States under the Airbus flag," Airbus President and CEO Fabrice Bregier said. Current A320 customers include US Airways Group and Frontier Airlines, and American Airlines gave Airbus a coup when it ordered 260 A320s last year.

Building in Alabama also helps Airbus cut foreign-exchange costs. Right now, most of its A320s are built in Europe, so its costs are in euros. But planes are sold in dollars because most aviation lending happens in dollars. That cost disadvantage will shrink if Airbus pays to assemble at least some of its planes in dollars.

The Mobile operation will join Airbus assembly plants in Toulouse, France; Hamburg, Germany; and Tianjin, China.

Labor costs are likely to be lower in Alabama, where union organizing is more difficult than in Europe or in other parts of the U.S.

Bregier said cost savings were not the main goal for the Alabama plant, but added, "Clearly we selected a competitive environment and we are businessmen, so we don't go to the worst place."

Airbus parent European Aeronautic Defense and Space (EADS) had planned to build the U.S. Air Force refueling tanker in Alabama but lost the bid to Boeing last year.

The deal should help Airbus politically in the U.S., said sales chief John Leahy in an interview. "Having an assembly line clearly gets you political support. A lot, in fact," he said.

Barclays analyst Joseph Campbell said Airbus and EADS may be looking ahead to a day when it has a larger defense presence in the U.S., and having a factory employing Americans making commercial airplanes may help.

He downplayed the idea that building A320s in the U.S. will help it sell more of them to American carriers. "United Airlines doesn't care if the airplane comes from Alabama or Toulouse," he said.

With cars, building them close to where they're sold cuts a significant part of the cost of delivering them to the showroom floor.

That cost is minimal for airplanes, because they can be delivered anywhere in the world within a few hours for the cost of a tank of jet fuel.

Alabama has been pursuing Airbus for several years, as it threw its weight behind the EADS effort to build the Air Force tanker. Unemployment in the state is 7.4 percent, so the Airbus announcement was welcome news.

Two thousand people attended the announcement at the convention center in Mobile, many of them waving American flags as music played.

Alabama offered the company $158 million in incentives such as road improvements and worker training. Airbus said it plans to spend some $600 million building the assembly line.

Boeing and Airbus have a long-running international trade dispute, and each has been critical of subsidies received by the other.

The Airbus plant advances the company's strategy of expanding production outside its home base.

The company, jointly run by French and German management and with plants in several European countries, wants to expand in China and India as well as the United States.

Airbus plans to eventually make four planes per month in Alabama. It is in the midst of speeding up worldwide A320 production to 42 per month.

Airbus officials said they have not yet decided whether the Alabama-built planes will stay within that rate or will be in addition to it.

The A320 is at the small end of what most people think of as a full-size airliner, generally used for short- to medium-haul flights. Airbus makes a family of planes form the A318 to the A321, which seat from 107 to 185 people. Airbus officials said all the variants would be built in Alabama. They retail for around $88 million.

Airbus said sections of the plane will be built at its other factories and shipped to the port in Mobile, where they will be trucked to the new assembly line. The line itself will be a carbon copy of other Airbus lines, reducing startup expenses, the company said.

Boeing makes some of its planes the same way; empty 737 shells arrive by train at its line in Renton, where they're stuffed full of airplane innards, and their wings are built and attached.

"It is truly a great day in the history of Alabama," Gov. Robert Bentley said. "It is the result of a lot of hard work and cooperation. This day will shape the future of the region for years to come."

By The Associated Press