Airbus shares fall as outlook is lowered due to supply problems

The Actions of Airbusfell 9.5% on Tuesday, after Europe’s largest aircraft manufacturer announced a Unforeseen cut to your prospects by 2024.

The group hopes to deliver 770 commercial aircraft this year, compared to the 880 expected previously. Airbus has moved the goal of producing 75 A320 family aircraft per month from 2026 to 2027.

In addition, it has decided to record a charge of around 900 million euros for the first half of 2024 due to the risks associated with certain telecommunications, navigation and observation programs. It has also reduced the free cash flow forecast to 3.5 billion euros from the 4 billion previously forecast.

Airbus stated that the commercial aircraft division “faces persistent specific supply chain issuesmainly in engines, aerostructures and cabin equipment.” The updated projection estimates a profit of 5.5 billion euros, below the previously estimated range of 6,500 to 7,000 million euros. This represents a 5% annual growthunder the 7% previously predicted by 2024.

Aircraft engines and parts face supply chain challenges

Although the industry does not have a demand problem, the aerospace sector faces challenges due to supply chain disruptions since the pandemic of COVID-19 in 2020, when air travel around the world came to a halt. Manufacturers of engines and parts for automobiles and airplanes were greatly affected during this period.

According to a report by ‘The Air Current’, the population of commercial engines in service was reduced to 41,000 in mid-2020, a third of the 2019 figure. The supply chain problem has persisted for years. At the annual JetNet iQ summit held in New York last year, several industry professionals expressed their concern about lack of repair capacityas this problem adds pressure to the supply of new parts.

Not only Airbus, but also its rival Boeing faces the same challenges. In recent years, the American aircraft manufacturer has suffered a series of major incidents involving mechanical failures on its 737 aircraft. Boeing has been in talks with AeroSystems, a US aerostructures supplier, to acquire the manufacturer in a direct all-cash deal without financing or other methods, with the aim of improving the safety and quality of its parts. However, the deal could result in a spin-off of some of its manufacturing plants to Airbus.

Airbus shares suffer a technical correction

The collapse of Airbus shares has officially led it into a technical correction. The share price has been on a downward trend for three months, after reaching an all-time high at the end of March, and plummeted approximately 22%up to 134.70 euros per share, at market close on Tuesday. A 20% drop is defined as a technical correction in the stock markets.

In April, the aerospace giant reported first-quarter earnings that missed market expectations, with a operating profit of 577 million of euros, 25% less than a year ago.

Airbus also announced the hiring of 10,000 new employees this year, with which its workforce will exceed 150,000 workers for the first time. Its free cash flow decreased by €1.8 billion, “primarily reflecting the expected buildup of inventories resulting from the execution of acceleration across all programs.” However, analysts expected a profit of 789 million euros and a reduction in cash flow of 1.3 billion.

On a positive note, Airbus is increasing production of the A350 aircraft to 12 units per month by 2028 due to optimistic order prospects. In the presentation of results, Guillaume Faury, CEO of Airbus, stated: “We have presented the results for the first quarter of 2024 in a operating environment showing no signs of improvement. They continue geopolitical tensions and in the supply chain“.