Airbus Cuts Guidance as Supply-Chain Snags Continue to Bite

(Bloomberg) -- Airbus SE cut its earnings and aircraft-delivery goals for the year as persistent supply-chain issues continue to deprive the European planemaker of vital components, dealing a setback to the company at a time when demand for its jets is at a record.

The company now expects to hand over 770 aircraft this year, down from a previous goal of 800, it said in a surprise announcement after European markets closed on Monday. Speaking on a call with reporters, Chief Executive Officer Guillaume Faury said the situation isn’t getting any better, requiring the company to adjust its goals.

Airbus has long warned of supply-chain issues and a lack of skilled workers, after the pandemic first grounded the global aviation industry and then left it unprepared once air travel came roaring back. Demand for its aircraft has been particularly strong in the last two years as airlines clamor for modern models, further exacerbating the shortfall in required equipment and labor.

The European planemaker now expects adjusted earnings before interest and tax of €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.

Key Speakers At Berlin Aviation Summit

Airbus 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 Co. 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, 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 rival 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.

Airbus shares have gained about 7.1% this year, while Boeing has lost about 32% in value. American depositary receipts of Airbus fell 4.7% as of 2:30 p.m. in New York.

Jet-engine makers General Electric Co. and RTX also traded lower after Airbus’ announcement. GE, Safran SA’s partner in the CFM joint venture, fell 2.7% in New York, while RTX slipped 1.7%.

‘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 hte 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.

(Updates with share trading in 11th paragraph.)

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