Airbus presses on with new plane seen as immune to travel slump

Airbus SE is stepping up development of its newest plane, pouring resources into the A321XLR even as it pulls back spending on other projects to save cash.

The jet, dubbed XLR for “extra long range,” would be the longest-distance version yet of Airbus’s top-selling A320-series narrow-body. It has racked up more than 450 orders since its launch last year, and the European planemaker sees it as resistant to the historic collapse in demand for aircraft brought on by the coronavirus.

The model has proved attractive to carriers eager to fly further with the economics of a single-aisle plane, and now has 24 customers, including American Airlines Group Inc., JetBlue Airways Corp. and United Airlines Holdings Inc. Its range of 4,700 nautical miles is 15% more than the existing A321 LR.

The goal is to ensure that the XLR enters service on time in 2023. Chief Executive Officer Guillaume Faury has identified the new model as one that can help the company through a slump in demand that’s likely to weigh on single-aisle output until 2022, saying in April that the XLR “will be a fantastic plane as we go out of the crisis.”

More Resources

While it’s pulled back on investments—slowing the ramp-up of its A220 single-aisle, for example—Airbus has added resources to the A321XLR, including assigning more engineers, according to people familiar with the matter, who asked not to be named discussing internal decisions.

Airbus declined to comment on specific measures. The company said that the A321XLR is “a priority project which is not paused in the current situation but accelerated at full speed.”

City pairs such as London to Miami and Rome to New York are feasible with the XLR, according to Airbus. Carriers including Ireland’s Aer Lingus, a unit of IAG SA, have ordered it with trans-Atlantic services in mind.

With wide-body jets expected to be the last to return as the health crisis weighs on demand, the XLR could find itself even more popular in the post-pandemic operating environment.

“It’s going to be a category killer,” said Sash Tusa, an analyst at Agency Partners in London. “It’s going to dominate medium-haul demand for probably three to five years coming out of the crisis.”

Strong Demand

The jet is in a particularly strong position after rival Boeing Co. opted not to commit to a new mid-market plane to replace its discontinued 757, the aircraft whose market niche the Airbus model most closely fills.

Read more: Airbus Gets Leg Up on Boeing With Order for New Long-Range Jet

With the U.S. company preoccupied with trying to get its grounded 737 Max back flying after two fatal crashes, the XLR has no current rival. United said in December that it would use the XLR to replace aging 757-200s on key trans-continental routes.

One drawback for Airbus and Boeing as narrow-body aircraft fly farther is that they’ve sapped demand for larger planes that typically have higher profit margins. Both companies had already cut wide-body output before the virus hit, and they’ve pulled back further since.

The complex design also presents a risk to profitability, after Airbus struggled with an array of cabin customization options on the A321XLR, Tusa said.

The XLR has also drawn some of its orders away from existing commitments as Airbus customers switch from smaller A320-family models to the longest-range plane.

And there’s no guarantee the demand will hold up. The XLR has significant orders from low-cost Asian carriers including AirAsiaX that are being squeezed by the Covid-19 outbreak.