Airbus missing parts everywhere forces cutback of targets

Airbus SE is coming up short on the millions of parts that make up the company’s commercial aircraft, and the situation is getting worse rather than better for the world’s largest planemaker.

The manufacturer warned late on Monday that it’s experiencing a shortage on engines, aerostructures and cabin interiors, which in turn is sabotaging the company’s delivery plans. As a result, Airbus pared back a whole slew of longer-term goals — from operating profit, cash generation and jet handovers to the monthly production rates of its all-important A320 model. 

The challenges facing Airbus and rival Boeing Co. are caused not by slack demand for its products, but rather a supply chain that’s been severely stretched for years. Airbus has long warned of the issue after the pandemic first upended the global aviation industry and then left it unprepared once air travel came roaring back. What’s new is the breadth of the problem, with Chief Executive Officer Guillaume Faury saying that engine shortages are now coming up as the latest pinch point. 

“That is a new situation that we were not expecting,” Faury said on a call after Airbus issued its surprise revisions for the year.

The company now expects to hand over 770 aircraft rather than 800 units in 2024, it said Monday after European markets closed. Adjusted earnings before interest and tax will reach €5.5 billion ($5.9 billion) this year, down from a previous goal of as much as €7 billion. The company also cut its outlook for free cash flow before customer financing to about €3.5 billion. 

Airbus fell as much as 12.4% in Paris, dragging the shares into a 5% loss for the year-to-date period.

Supplier Safran SA slid as much as 5%, while MTU Aero Engines AG declined 7.9%.

“The dust needs to settle before we can turn positive again,” said Christophe Menard, an analyst at Deutsche Bank, who called Airbus’s profit warning “stunning.” “June deliveries are apparently sluggish and there is no guarantee at this stage that the new delivery target will be easy to achieve by year-end.”

Faury told reporters the situation isn’t getting any better, requiring the company to adjust its goals. 

Airbus also pushed back its goal to produce 75 of its A320 single-aisle jets per month by one year to 2027. That more conservative approach stands to further intensify a shortfall in new jets, given that Boeing is also making its 737 model at a significantly reduced monthly rate. 

The annual delivery revision is the second time since 2022 that Airbus has pared back that goal. The jetmaker had most recently reiterated its 800-unit aspiration at the end of April, when it reported numbers for the first quarter. 

Missing Parts

Faury said that cabin parts, for example, are in short supply because airlines are refurbishing older planes, meaning shipments to Airbus are constrained. Many airlines have complained that aircraft deliveries are delayed, forcing them to fly older kit for longer. 

The CEO said in an interview earlier in June that any supply issues might persist for the next 2-3 years. Faury cautioned on Monday that economic and geopolitical challenges are contributing to the situation and are here to stay “for a while.”

Compounding Airbus’s woes are issues afflicting the engines on its bestselling A320 model, which is powered by RTX Corp.’s Pratt & Whitney model or the Leap variant made by the CFM International Inc. consortium. 

Faury said on the call that the situation has “significantly degraded” in recent weeks, and that the company will end up with gliders by the end of the quarter — industry parlance for planes without turbines. Engine issues are becoming more prevalent, after appearing to be more under control in 2023 and beginning of this year, the CEO said. 

Airbus has enjoyed a relatively calm first half of the year, while Boeing has fallen into a deep crisis following a near-catastrophic accident on an airborne aircraft in early January. As a result, the US company has been forced to pare back output of its 737, potentially handing Airbus an opening to win business from Boeing loyalists. At the same time, both companies are largely sold out on their bestselling products, giving Airbus only limited scope to capitalize on Boeing’s woes. 

‘Difficult’

The new forecast excludes any possible acquisitions, Airbus said. The company is nearing an agreement with Spirit AeroSystems Holdings Inc. to take over parts of the aerospace supplier’s business, Bloomberg reported last week. Faury said discussions are continuing, but he declined to comment on a possible conclusion of the talks. 

“Spirit’s situation is difficult from an industrial standpoint,” Faury said. “It is part of the difficulties that are triggering this update.”

Airbus said it will also suffer charges of about €900 million related to some space programs, citing “complex and sophisticated products” that created development risks. As a result, Airbus said it will “evaluate all strategic options such as potential restructuring, cooperation models, portfolio review and M&A options.”

That review of the troubled space programs is about 70% complete, Airbus said on a separate call with analysts.

The revision comes shortly before the end of Airbus’s second quarter. The Toulouse, France-based company is scheduled to report full half-year results on July 30.