Airbus CEO Shrugs Off Concerns Over Supply Disruption Amid Sanctions

By Dow Jones Business News, 
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By Robert Wall

Airbus Group NV (AIR.FR) Chief Executive Tom Enders said the company isn't concerned about supply disruptions of titanium from Russia even as the European Union imposes new sanctions on Russia.

Airbus's relationship with Russian company VSMPO is "very stable," Mr. Enders said. Airbus purchases titanium raw material and forgings from VSMPO, the world's biggest titanium supplier.

"I do not expect the flow of it will be cut off short of all-out war," Mr. Enders told analysts Tuesday when presenting the company's first-half results.

The European Union is imposing further sanctions on Russia over the country's efforts to destabilize Ukraine. The measures gained added impetus after the July 17 downing of Malaysia Airlines Flight 17 that Western officials blame on pro-Russian separatists in eastern Ukraine. Russia denies the charge.

Airbus's commercial plane unit and rival Boeing Co. ( BA ) rely heavily on titanium from Russia to build their jets. Titanium is increasingly important on commercial airliners as Airbus and Boeing increase their use of composites.

The structure of Airbus's new A350 model, now in flight testing, has 14% titanium content. Titanium has properties that make it particularly useful in bridging composite and aluminum structures.

Mr. Enders said VSMPO is a "key strategic partner."

Airbus for at least two months has been examining potential mitigation actions should disruptions arise. Gunther Butschek, chief operating officer for the Airbus commercial airplane unit, said in May the company was in talks with potential alternative suppliers.

Mr. Enders said the company is continuing to explore mitigation actions, while expressing "strong confidence" in the VSMPO ties.

Write to Robert Wall at robert.wall@dowjones.com

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This article appears in: Commodities

Referenced Stocks: AIR , BA , EADSY , VSMO

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