Massive Airbus delivery challenge gets tougher with Rolls-Royce delays
Airbus SE has a mighty challenge ahead of it, one that seems to be getting tougher.
The European planemaker is targeting deliveries of around 800 commercial aircraft this year, an 11 per cent jump from 2017. To do it, Airbus needs to hand over some 300 jets in its final quarter, which would be a record. But delays with engines made by Rolls-Royce Holdings are adding to the degree of difficulty.
On Friday, Bloomberg Newsreported that RollsRoyce had fallen behind schedule on deliveries for Airbus’s new model, the A330neo. Rolls was aiming to provide 30 of its Trent 7000 engines to Airbus by the end of this month, which would allow the Toulouse, France-based planemaker to deliver 15 of the wide-body aircraft to customers by year-end.
But Airbus will only get 10 engines, enough for five planes. That’s a 10-plane shortfall. The shares of both companies fell sharply on Friday before recovering most of their losses by the end of trading in Europe.
Getting production right is a critical task for Airbus’s next chief executive officer, Guillaume Faury, who is looking to prove his chops as president of the commercial aircraft business before formally taking over control of the group in April. But by all accounts, the target is all consuming.
“We have caused Airbus a significant problem, and we are working with them to manage the situation with airline customers and lessors,” RollsRoyce’s president of civil aerospace, Chris Cholerton, and large-engine program director, Chris Young, said in a memo to staff. Rolls-Royce later notified markets that it had cut its overall results scheduled for Oct. 31, delivery goal by 50 to about when the manufacturer is 500 commercial engines this expected to update markets on year, while maintaining its its production plans. profit and cash-flow targets. For Rolls, the factory stumbles
For Airbus, the delays with threaten to pile new pressure the A330neo threaten to disrupt on the company, which is an already tight final already struggling through quarter of 2018 that’s been durability flaws with the stretched by design and production engine’s sister model, the faults with separate Trent 1000, which powers engines that power its singleaisle Boeing Co.’s 787 Dreamliner. A320 jet family. IAG SA, The A330neo, whose engine which owns British Airways, suffers from similar glitches, said Friday that its A321neo is expected to debut in the narrow-bodies have been coming weeks, about a year delayed “principally related to behind its initial schedule. engines, but not solely.” In-service disruption
The slower widebody handovers caused by design faults on the could reduce Airbus’s 787’s engine is “a source of anxiety full-year sales by 1.5 billion to our customers and we euros or hit earnings by about must not exacerbate this by 100 million euros, Francois missing commitments to our Duflot, an analyst with Trent 7000 customers,” Rolls Bloomberg Intelligence, wrote said in the memo to staff. in a research note. It’s a setback too for Rolls
Airbus declined to comment Royce ahead Chief Executive of third-quarter Officer Warren East, who is trying hard to turn around one of Britain’s few remaining industrial juggernauts. In his four years at the helm, East has worked to rebuild the engineering firm from the bottom up, shedding management layers, peripheral units and outdated business practices.
“We would extrapolate that the financial impact on Rolls will be compensation payments to Airbus and the airlines, and a build-up of inventory into the year-end,” Robert Stallard, an analyst with Vertical Research Partners, said in a note, while cutting his price target on Rolls by 11 percent to 930 pence. “The profitand-loss impact could ironically be positive, as the Trent 7000 original-equipment deliveries will be loss making, with the returns coming from the aftermarket.”