Airbus SE vowed to turn around its slow pace of aircraft deliveries in the second half of 2023 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 in 2023, while cautioning that the pace of deliveries would be “significantly” lower in the first half of 2023 than the second.

Airbus has warned of persistent issues with its supply chain that have created “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.

Read more: Airbus, Safran Warn Supply Chain Snarls Will Drag Into 2024

Faury said Airbus is “very closely monitoring” the issues on Pratt’s Geared Turbo Fan unit. Deutsche Lufthansa AG said May 3 that a third of its A220 fleet in Zurich is grounded because 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 pushing 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,” 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 in 2023, which it attributed to inventory build-up as it prepares to ramp up production.

April Shipments

Shipments totaled 127 planes in the first quarter of 2023, a 9% drop from Q1 2022, leaving Airbus to lag behind Boeing Co. for the first time in almost five years. Bloomberg reported earlier on May 3 that Airbus deliveries fell to about 55 jets in April 2023 from March 2023. The company didn’t provide a figure for its April 2023 deliveries in the earnings release. 

Read more: Despite Expected Delays, Airbus Reaffirms 2024 Production Targets

The supply constraints could last until the end of 2024 or even into 2025, putting pressure on the plane maker’s ambitious production ramp-up of its best-selling A320neo family to 75 a month by 2026.

In January 2023, Toulouse, France-based Airbus forecast an approximately 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.

Source: https://www.supplychainbrain.com/articles/37175-airbus-vows-faster-year-end-deliveries-after-slack-first-quarter