Airbus cuts key targets and takes hefty Space charge

Jeddah - Yasmine El Tohamy - PARIS: Airbus softened key industrial and financial targets and took a hefty €900-million ($965 million) charge for its troubled space activities as Europe’s largest aerospace group sought a clean slate approach to supply disruptions and commercial risks, according to Reuters.

Yielding to growing skepticism among suppliers over its plans for jet output, Airbus lowered its widely watched forecast for deliveries this year to around 770 jets from around 800.

It also tempered plans to raise output of its best-selling A320neo family, by delaying the date at which it expects to reach a record production speed of 75 jets a month to 2027 from 2026. That compares with an estimated 50 jets a month now.

As a result of the lower delivery forecasts, which imply annual growth of 5 percent instead of 9 percent, Airbus lowered its main financial targets for 2024.

It now expects underlying operating income of around 5.5 billion euros, instead of a range of 6.5 billion to 7 billion, and free cashflow of 3.5 billion instead of 4 billion.

“We are facing headwinds right now; we have to bite the bullet,” Airbus CEO Guillaume Faury told analysts.

The downward revision in industrial forecasts comes weeks after Reuters first reported that Airbus was facing a new set of output delays as it grapples with increased parts shortages.

Industry sources said Airbus concluded it had exhausted its spare margin for deliveries after falling short in the first five months and then starting June on a weak note — with barely half the month’s anticipated total having been delivered so far.

The aerospace industry has been struggling to rehire workers and stabilize supplies after the pandemic left many suppliers with weak balance sheets.

Engine Shortages

As the no.1 plane producer, Airbus has borne the brunt of the problem as rival Boeing faces regulatory curbs and an internal crisis, but some experts and suppliers — including engine makers — have long voiced doubts about its plans, saying they were too ambitious.

One senior supply chain executive questioned on Monday whether the latest reductions went far enough.

Faury appeared to turn the tables, however, saying supplies of engines for its best-selling A320-family of narrow-body jets had deteriorated “significantly” in recent months.

The shortfall, he said, affects both engine makers for the A320neo narrow-body family, which competes with the Boeing 737 MAX and accounts for most of Airbus’ cash and profits.

Faury said engine makers would have to “face the consequences” of any delays, apparently referring to penalties.

RTX subsidiary Pratt & Whitney declined comment. French-US venture CFM International, co-owned by GE Aerospace and France’s Safran, said: “The supply chain environment remains challenging, and we are working to accelerate (engine) deliveries to meet demand from (Airbus).”

On larger jets, Faury said Rolls-Royce engines for the A330neo were behind schedule but not those for the A350.

Faury also told reporters that an uncertain outlook for the industrial commitments of aerostructures maker Spirit Aerosystems had contributed to the downward revision.

He declined to comment on the timing of a widely expected deal to acquire Spirit assets related to the A350 and A220 jet programs as part of a carve-up of the supplier with Boeing , which sources have said they expect in days or weeks.

Boeing is nearing a deal to buy back Spirit after its former subsidiary made substantial progress in separate talks with Airbus over a transatlantic breakup of the struggling supplier, Reuters reported last week.

The Wall Street Journal reported on Monday that Boeing has proposed funding its acquisition of the supplier with stock rather than cash after the companies were closing in on an all-cash deal this weekend when Boeing switched the offer.

Spirit said it remains “focused on providing the best quality products for our customers.”

Shortages of seats and cabin parts are another “very difficult situation,” Faury said.

Christian Scherer, who took over as head of the planemaking division in January, told German newspaper Hamburger Abendblatt in an interview published on Saturday that engines, landing gear and cabin components are key problem areas.

In Canada, workers who produce components for some Airbus and Boeing landing gear at a Safran factory near Montreal have been striking for nearly four weeks. Safran said it was continuing to supply landing gear as planned.