Airbus raises annual targets, adjusts production pace

Airbus (PA:AIR) managed to overcome supply chain challenges, confirming its widely watched forecast of 600 aircraft deliveries this year despite early signs of labor shortages in the wake of the coronavirus pandemic.

On the strength of these results, the Airbus share gained 1.4% to 111.56 euros at 10:33 am, recording one of the strongest gains of the CAC 40 (+0.08%).

The group raised its annual financial targets on Thursday after better-than-expected results in the third quarter, brushing aside criticism from industry players that its production forecasts were too optimistic.

According to the executive chairman, Guillaume Faury, the group is on track to return to its pre-crisis production levels, after stalling for 15 months to avoid an overproduction of aircraft at a time when air transport was going through the worst crisis in its history.

“We are seeing labor shortages around the world, which are impacting all sectors,” he told reporters. “We are ramping up and we see all the difficulties in coming out of this sort of hibernation phase.”

Airbus says it sometimes has trouble getting certain parts delivered on time, which explains the recent leveling off of deliveries, which it says is not likely to last.

The world’s largest civil aircraft manufacturer reported a 19% drop in operating profit in the third quarter, to 666 million euros, while its sales fell by 6% to 10.518 billion euros.

It said it was targeting full-year operating profit of 4.5 billion and free cash flow of 2.5 billion, compared with 4 billion and 2 billion respectively previously.

Analysts on average were expecting a quarterly operating profit of 623 million euros on sales of 10.651 billion, according to a company consensus.

PRODUCTION TARGETS MAINTAINED

Airbus has adjusted its main production target for single-aisle A320 Family aircraft to 65 per month by summer 2023, slightly later than originally planned.

In May, Airbus had said it was asking its suppliers to guarantee a firm production rate of 64 aircraft per month by the second quarter of 2023.

The group said it sees signs of a recovery in air travel, particularly in the category of its A320 medium-haul aircraft, a competitor to the Boeing (NYSE:BA) 737.

It confirmed its ambition to increase production rates to 75 aircraft per month by 2025. Engine manufacturers and leasing companies have expressed reluctance, believing that the project could lead to an overheating of the market and penalize their own activities, which depend heavily on the life of older aircraft.

“We know there are a lot of opinions on this, but we have our own opinions, and our own opinion is that demand supports the rate of 75, but we need to look at the supply chain situation,” said Airbus’ executive chairman.

“We’re not there yet, but we continue to see very strong demand in the market and we want to serve that demand going forward.”

Regarding other programs, Airbus plans to increase A330 production from the current two per month to nearly three by the end of 2022. In addition, it confirmed that it wants to increase production of the new A350 wide-body jet from five to six per month, but has delayed its implementation from fall 2022 to early 2023.