Airbus Logs Sharp Profit Drop After Supply-Chain Setbacks — 2nd Update

By Mauro Orru

Airbus posted a slump in profit for the second quarter and confirmed it would deliver fewer planes than initially forecast this year amid persisting supply-chain hurdles.

The European plane maker said it was still aiming for roughly 770 plane deliveries, below an original target of about 800 that Airbus lowered last month due to challenges in procuring engines, aerostructures and cabin equipment.

Chief Executive Guillaume Faury said the group was seeking to address specific supply-chain challenges and protect the sourcing of key equipment.

Airbus and the wider aviation industry have been agonizing for years over supply-chain hurdles that have made it harder to procure some raw materials and spare parts, slowing aircraft production and, consequently, deliveries. The company delivered 323 planes by the end of June, meaning it still needs to dispatch about 447 aircraft by the end of the year to achieve its target.

Airbus spooked markets last month when, in a single update to investors, the group slashed its commercial aircraft delivery goal and financial targets and warned it would book an impairment linked to its space activities. The stock had been growing this year, but the announcement triggered a selloff that wiped out about $12 billion in market value.

Now, Airbus shares are down 4.4% since January, narrowing the gap with rival Boeing's stock, which is down 28% since the year began. Boeing continues to face pressure from airlines and regulators to ensure safety and quality in its production processes after an Alaska Airlines emergency landing in January that prompted a temporary grounding and immediate inspections of Boeing 737 MAX jets.

Despite its own setbacks, Airbus continues to book a steady stream of orders. The company counted 310 net orders through June. Airlines are still scrambling for planes to meet strong demand for international air travel following the pandemic, and Airbus will have to navigate strained supply chains to make good on those orders.

The group said it still expects to produce 75 of its A320 narrow-body aircraft a month in 2027, four of its A330 wide-body planes a month in 2024, and 12 a month of its bigger A350 model in 2028.

Meanwhile, challenges at Airbus's space business persist after the division booked EUR989 million in charges in the first half, citing revised forecasts on workload, risks and costs for some telecommunications, navigation and observation programs.

"We are addressing the root causes of these issues," Faury said.

For the three months to the end of June, Airbus posted revenue of nearly 16 billion euros ($17.31 billion), up just 1% on year.

Net profit plunged 78% to EUR230 million, while adjusted earnings before interest and taxes--Airbus's preferred measure of profitability--slumped 56% to EUR814 million.

Analysts had forecast revenue of EUR15.82 billion on a net profit of EUR566 million and adjusted EBIT of EUR699 million, according to a market consensus provided by the company based on estimates from 20 analysts.

For the year, Airbus continues to expect adjusted EBIT of around EUR5.5 billion. Free cash flow before customer financing--a metric closely watched by analysts and investors--is projected at around EUR3.5 billion.

Write to Mauro Orru at mauro.orru@wsj.com

(END) Dow Jones Newswires

July 30, 2024 12:41 ET (16:41 GMT)

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