Airbus (AIR.PA) on Thursday confirmed plans to ramp up production of its best-selling aircraft as airlines begin patchy recovery from pandemic, despite setbacks in Europe and a worsening wave of infections quickly to India.

Unveiling a stronger-than-expected recovery in first-quarter profits, CEO Guillaume Faury said domestic air travel is rebounding in China and the United States, while cross-border travel is likely to remain weak for some time.

Conflicting policies on quarantines, lockdowns and testing have disrupted Europe’s single aviation market: one of the reasons Faury said he remained cautious even while planning to increase production in the second half of the year for meet the demand for travel elsewhere.

“The lack of coordination of measures taken mainly in Europe … leads to a much worse travel situation in Europe than in other comparable markets,” said Faury.

“It is a concern and a headwind for the recovery in aviation.”

India, one of Airbus’ largest markets, is an “area of ​​great concern” as the country faces a deadly second wave of COVID-19, with record daily infection and death rates. Read more

“We haven’t seen a direct impact on us yet, but this is probably one of the areas where we shouldn’t expect (things to be) as good as we expected before,” Faury said. .

Airbus plans to increase production of single-aisle medium-haul aircraft to 43 per month in the third quarter and 45 in the fourth, from a current rate of 40 per month – down from 60 before the crisis.

Airbus is also planning a further “steep” ramp-up in 2022 and 2023, but that depends in part on suppliers’ ability to keep pace, he said.

SUPPLIER RISKS

Airbus shares rose 2.8% as it maintained its production and financial targets for this year.

Some industry executives have expressed concerns that production is increasing too quickly. Faury said the balance of risk is shifting from demand to the supply chain.

Airbus is not directly affected by a global semiconductor shortage but is monitoring the situation, he added.

The boss of American rival Boeing (BA.N), which is grappling with new technical problems with its competitor 737 MAX, pledged Wednesday to increase production in the “most stable way”.

Airbus first quarter operating profit increased 147% to € 694 million ($ 841.6 million), driven by commercial jets and helicopters, as revenue fell 2% to 10.46 billion euros.

It generated positive free cash flow of 1.2 billion euros in the first quarter, compared to an outflow of 8 billion euros in the same period last year, when Airbus had to pay a record fine for corruption to Britain, France and the United States.

Part of the cash boom stems from a gap between when goods are received and payments to suppliers, Airbus said.

For the full year, Airbus expects deliveries equivalent to last year’s 566 airliners, adjusted operating profit of € 2 billion and breakeven free cash flow.

(1 USD = 0.8246 euros)

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