Airbus Delivery Challenges

By Tim Hepher

PARIS (Reuters) – Airbus deliveries are slowing down as September comes to a close, raising questions about the company’s ability to meet its revised annual target, according to analysts and industry sources.

In July, Airbus issued a profit warning and lowered its full-year delivery target from 800 to 770 aircraft due to shortages in engines and other components. They also postponed their medium-term production goal to 2027.

Delays in deliveries and increased production of core narrowbody jets have led to growing impatience within Airbus. CEO Guillaume Faury has expressed frustration over stagnant production levels.

As of September, Airbus has delivered approximately 30 aircraft, totaling about 477 deliveries for the year, based on data from consultancy Cirium Ascend. If the current pace continues, they may end September with 483 deliveries, which is below the 488 recorded at the same point last year. In September 2022, Airbus delivered 55 jets.

Analyst Rob Morris from Cirium Ascend noted that Airbus has been closely tracking 2023’s cumulative delivery numbers, casting doubts on meeting the 770 target. An Airbus spokesperson reiterated the company’s guidance.

Historically, Airbus has achieved surprising results in Q4, but ongoing supply chain issues and internal production challenges could hinder these efforts. Analyst Sash Tusa expressed concerns about the potential for underperformance beyond 2024.

While Airbus aims for about 770 deliveries, this range gives them some leeway to avoid a further guidance cut, which would negatively impact senior management, according to analysts.

Cash Pressure

At the time of its target announcement in July, Airbus pointed to delays in LEAP engines produced by Safran and the GE Aerospace venture CFM for the A320neo, among other parts such as landing gear. Reports indicate that engine shortages persist, greatly affecting airplane deliveries.

GE Aerospace’s CFO Rahul Ghai mentioned earlier this month that third-quarter engine production would improve from the second quarter but still face year-over-year pressure, with expectations of further enhancements in Q4.

Airbus has been producing about 50 A320neo jets monthly, hardly different from last year. The struggle to reach a medium-term target of 75 jets monthly has created internal pressures to conserve cash, prompting Airbus to stockpile inventory for flexibility.

In July, Airbus initiated a cost-reduction and performance enhancement initiative called LEAD!. CEO Christian Scherer alerted staff about increasing unit costs surpassing revenue growth, stating that the plan’s primary goal was to ensure adequate deliveries for 2024. Scherer emphasized the need to scrutinize costs comprehensively.