Up, up and away.
Courtesy of Airbus
By Geoffrey Smith
February 27, 2015

Shares in Boeing Corp’s (BA) biggest rival Airbus Group NV (EADSY) rocketed as the company said it would increase production of its single-aisle A320 airliner by nearly 20% to meet surging demand .

The Toulouse, France-based company also said it would increase its dividend to a new record high of €1.20 a share after a sharp rise in net income to €2.3 billion. The shares rose over 7% in Europe in response to the news.

Airbus currently makes 42 A320s a month at sites in France, Germany and China, and is also in the process of setting up facilities in Alabama. It will raise this to 50 a month from 2017, reflecting a full-to-bursting order book or single-aisle planes that had risen to over 5,000 by the end of January.

Reuters quoted chief executive Tom Enders as saying that it may raise production even more.

“The demand is clearly there to move the rates to 60-plus,” Enders said. “There are studies underway.”

At the same time, though, Airbus said it will cut the number of wide-body A330 planes it makes to 6 a moth from nine currently. The company aims to introduce a new version of the A330, known as the A330neo (“new engine option’) from 2017. The only fly in the ointment remained the company’s military business, where it took a €551 million charge due to delays on its A400M transport plane project.

Both Airbus and Boeing are enjoying a sweet spot in a famously cyclical industry. With air travel in Asia expanding rapidly, and financing costs for airlines in developed markets at record lows thanks to ultra-low interest rates in the U.S. and the Eurozone, conditions have rarely been as favorable for airlines. On top of that, the collapse in oil prices has also improved the longer-term outlook for the industry, by slashing one of its biggest cost components.

International Airlines Group (ICAGY), the parent company of British Airways and Spanish-based Iberia, provided further evidence of that trend Friday, saying 2014 operating profit rose 95% from a year earlier, and saying it expected it to double again next year.

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