Introduction to Airbus’s Current Challenges
European-based aerospace giant Airbus has recently updated its guidance for 2024, revealing that it will not meet its initial target of delivering 800 commercial aircraft. The shortfall is primarily due to persistent supply chain disruptions, which have led to shortages in critical components such as engines, aircraft structural parts, and interior cabin equipment. Consequently, Airbus now anticipates delivering approximately 770 aircraft by the end of 2024.
Impact of Supply Chain on Production
One of the most significant setbacks for Airbus has been the delay in the ramp-up of the A320neo family production line. Originally planned to increase to 75 aircraft per month by 2026, this acceleration has now been postponed to 2027. This adjustment reflects the ongoing challenges in securing essential materials and components. Airbus CEO Guillaume Faury expressed that the supply chain issues are showing no signs of improvement, necessitating a recalibration of production targets for the near future.
The scarcity of new jet engines has emerged as a particularly critical bottleneck. This shortage is compounded by the increased demand for cabin interior parts. Airlines are actively refurbishing older fleets, thus straining the supply of new interior components for Airbus’s production lines. This situation is forcing airlines to keep older aircraft in service longer than intended, as they wait for new deliveries, which are now delayed.
Economic and Geopolitical Factors
In addition to supply chain woes, Airbus is navigating through complex economic and geopolitical landscapes. These challenges are expected to persist, influencing operations and strategic decisions for the next two to three years. Despite these hurdles, Airbus managed a stable performance in the first half of 2024, securing significant orders from major airlines like Saudia, IndiGo, and Korean Air.
Contrastingly, Airbus’s main competitor, Boeing, has faced several public relations issues, notably the Alaska Airlines 737 MAX 9 incident in January 2024, which has impacted its reputation and operations. While Boeing has had to reduce its production rates, Airbus has also been unable to fully capitalize on these missteps due to its own production constraints.
As a result of these challenges, Airbus has adjusted its financial outlook for 2024. The company now projects an adjusted earnings before interest and tax of €5.5 billion, a decrease from the previously forecasted €7 billion. Furthermore, the outlook for free cash flow before customer financing has been revised to about €3.5 billion.