Airbus Adjusts Amid Supply Strain: Cuts 2023 Delivery Targets and Earnings Projections

An airbus plane flying through clouds.

Airbus SE revises its financial and delivery forecasts for the year amid ongoing supply chain challenges and engine supply bottlenecks, signaling a cautious approach to production and market expectations.

Supply Chain Headwinds

Airbus SE has announced a reduction in its aircraft delivery target from 800 to 770 for the year, alongside a decrease in its earnings and cash flow projections. This adjustment comes as the company grapples with persistent supply chain disruptions that have impeded access to essential components and skilled labor. The European aerospace giant has been facing these challenges since the pandemic’s impact on the aviation industry, which has been further strained by a surge in demand for modern aircraft models.

Operational Adjustments Amid Market Pressures

The company’s CEO, Guillaume Faury, acknowledged that the supply situation, particularly for jet engines, has deteriorated unexpectedly, leading to a revised adjusted EBIT forecast of €5.5 billion, down from up to €7 billion. Airbus also anticipates a free cash flow before customer financing of around €3.5 billion. In response to these challenges, Airbus has delayed its production goal for the A320 single-aisle jets, a key revenue driver, pushing the target of 75 jets per month from 2026 to 2027. This conservative stance is likely to exacerbate the shortage of new jets in the market, especially as Boeing also operates at a reduced production rate.

Market Impact and Strategic Considerations

Airbus’s delivery revision, the second since 2022, reflects the ongoing difficulties in securing parts such as cabin components, with airlines refurbishing older planes and thus limiting new shipments. The company’s shares have experienced a decline following the announcement, with repercussions also felt by jet-engine manufacturers General Electric Co. and RTX Corp. Amid these operational challenges, Airbus is exploring strategic options, including potential restructuring and mergers and acquisitions, as it nears a deal with Spirit AeroSystems Holdings Inc. to acquire parts of the supplier’s business.

In light of these developments, Airbus is navigating a complex landscape of market pressures and operational uncertainties, highlighting the need for adaptability and strategic foresight in the aerospace industry.