Airbus SE vowed to turn around its slow pace of aircraft deliveries in the second half after lackluster output weighed on profit and sales in the first quarter.
(Bloomberg) — Airbus SE vowed to turn around its slow pace of aircraft deliveries in the second half after lackluster output weighed on profit and sales in the first quarter.
The world’s biggest commercial aircraft manufacturer said the final four months of 2023 would be stronger, as Airbus follows its typical pattern of churning out a much higher number of jets in the final stretch. Speaking on a call with journalists after reporting earnings, Chief Executive Officer Guillaume Faury reiterated his goal to hand over 720 units this year, while cautioning that the pace of deliveries would be “significantly” lower in the first half than the second.
Airbus has warned of persistent issues with its supply chain that create “challenges to roll the ball forward at the speed we want,” according to Faury. Besides a lack of skilled labor and parts, the company has also been forced to grapple with glitches on some of its most advanced aircraft engines, including the Pratt & Whitney units that power the A320 and smaller A220 single-aisle jets.
Faury said Airbus is “very closely monitoring” the issues on Pratt’s Geared Turbo Fan unit. Deutsche Lufthansa AG said Wednesday that a third of its A220 fleet in Zurich is grounded becasuse of engine issues. That’s adding to a growing chorus of carriers complaining of bigger-than-usual outages on their fleets just as the airline industry gears up for a bumper summer.
Airbus earlier reported a drop in first-quarter profit and sales amid the supply issues. Adjusted earnings before interest and taxes fell to €773 million ($854 million) from €1.26 billion in the first three months of 2022, Airbus said in a statement. Sales dipped to €11.8 billion from €12 billion.
The company stood by its full-year targets for cash flow and aircraft deliveries, while pusing back the entry into service date of its A350 freighter version into 2026, which Faury said amounts to “a few months.”
Supplier Woes
Airbus has struggled to meet soaring demand for aircraft as travel rebounds from the Covid-19 pandemic. Suppliers contending with the residual impact of the global health crisis are still short of workers and can’t meet demand for components ranging from seats to semiconductors to raw materials. That’s sapped profit and cash flows, because Airbus recognizes revenue only when a plane is delivered.
“We continue to face an adverse operating environment that includes in particular persistent tensions in the supply chain,” Chief Executive Officer Guillaume Faury said in the statement. “We remain focused on delivering the commercial aircraft ramp-up and longer-term transformation.”
Foreign-exchange movements also squeezed profit. Airbus receives revenue in dollars, which have been falling in value against the euro, the currency that makes up the bulk of its expenses. Airbus said it had taken a charge of €360 million related to a mismatch in pre-delivery payments in dollars and a revaluation of its balance sheet.
The company had negative free cash flow of about €889 million, compared with positive free cash flow of €213 million a year earlier, which it attributed to inventory build-up as it prepares to ramp up production.
April Shipments
Shipments totaled 127 planes in the first quarter, a 9% drop from a year earlier, leaving Airbus to lag behind Boeing Co. for the first time in almost five years. Bloomberg reported earlier on Wednesday that Airbus deliveries fell to about 55 jets in April from March. The company didn’t provide a figure for its April deliveries in the earnings release.
The supply constraints could last until the end of 2024 or even into 2025, putting pressure on the planemaker’s ambitious production ramp-up of its best-selling A320neo family to 75 a month by 2026.
In January, Toulouse, France-based Airbus forecast an about 7% increase in adjusted earnings before interest and tax to €6 billion for all of 2023. It expects free cash flow before some items to drop to €3 billion from €4.7 billion.
(Updates with comment from CEO in fourth paragraph)
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