Airbus Revises Delivery Targets and Financial Forecasts Amid Supply Chain Challenges
PARIS — Airbus has adjusted its key industrial and financial targets while incurring a significant €900 million ($965 million) charge for its beleaguered space activities, as Europe’s largest aerospace group contends with supply chain disruptions and commercial risks.
In response to increasing doubts from suppliers about its jet output plans, Airbus has reduced its forecast for aircraft deliveries this year from around 800 to approximately 770. Additionally, the company has delayed its plans to boost production of its popular A320neo family, moving the target to achieve a record production speed of 75 jets per month from 2026 to 2027. Currently, production is estimated at 50 jets per month.
The revised delivery estimates, projecting 5% annual growth instead of the previously expected 9%, have led Airbus to lower its primary financial targets for 2024. The company now anticipates an underlying operating income of around €5.5 billion, down from the previous range of €6.5 billion to €7 billion, and projects free cash flow of €3.5 billion instead of €4 billion.
"We are facing headwinds right now; we have to bite the bullet," CEO Guillaume Faury informed analysts.
These changes follow reports that Airbus is encountering new production delays due to intensified parts shortages. Industry insiders indicate Airbus concluded it had exhausted its delivery buffer after underperforming in the first five months of the year and starting June weaker than expected, delivering only half of the anticipated total for the month so far.
The aerospace sector has struggled to replenish its workforce and stabilize supply chains following the pandemic, which adversely affected many suppliers’ financial stability.
Engine Shortages
As the leading aircraft manufacturer, Airbus has been hit hard by supply chain issues while competitor Boeing faces regulatory constraints and its own internal crises. Experts and suppliers, including engine manufacturers, have long expressed doubts about Airbus’s ambitious plans.
A senior supply chain executive recently questioned whether Airbus’s reduced targets were sufficient. Faury countered, noting that engine supplies for the A320-family of narrow-body jets had "significantly" worsened in recent months. The A320neo, which competes with Boeing’s 737 MAX, is pivotal to Airbus’s revenue and profits.
Faury suggested that engine manufacturers would face "consequences" for any delays, hinting at potential penalties. Pratt & Whitney, a subsidiary of RTX, declined to comment, while CFM International (a joint venture of GE Aerospace and France’s Safran) acknowledged the challenging supply chain environment and ongoing efforts to expedite engine deliveries for Airbus.
For larger aircraft, Faury noted Rolls-Royce engines for the A330neo were delayed, though A350 engines remained on schedule. He also cited an uncertain outlook for Spirit Aerosystems’ industrial commitments as a factor in the downward revision.
Faury did not comment on the timing of a potential deal to acquire Spirit assets connected to the A350 and A220 jet programs, which sources suggest could be finalized soon. Boeing is reportedly nearing an agreement to repurchase Spirit, after the company advanced in discussions with Airbus for a transatlantic division of the struggling supplier.
According to The Wall Street Journal, Boeing plans to fund the acquisition with stock instead of cash, having recently altered the offer. Spirit reiterated its commitment to delivering quality products to its customers.
Further complicating matters are shortages of seats and cabin parts, which Faury describes as a "very difficult situation." Christian Scherer, head of Airbus’s planemaking division since January, identified engines, landing gear, and cabin components as critical problem areas in an interview with the German newspaper Hamburger Abendblatt.
Meanwhile, in Canada, workers at a Safran factory near Montreal, producing Airbus and Boeing landing gear components, have been on strike for nearly four weeks. Safran states it continues to supply landing gear as planned.
Source: Reuters
