Airbus confronts earnings challenges despite market opportunities
Date
6/27/2024 5:55:45 AM
(MENAFN) Despite operating in a sector experiencing robust demand growth and facing a competitor struggling with significant operational and financial issues, Airbus finds itself grappling with a starkly different outcome. Recently, Airbus's stock plummeted over 10 percent following warnings about slower aircraft deliveries and ongoing challenges in its space division. Analysts, including Philipp Buller from Berenberg, project a reduction in this year's EBIT forecast by approximately 1.2 billion euros, representing an 18 percent decrease.
The issue plaguing Airbus isn't a lack of growth prospects. On the contrary, the company consistently outpaces its competitor Boeing in securing new orders. Prior to the recent cautionary announcement, analysts had anticipated profits nearly doubling to around 7.5 billion euros between 2023 and 2026, as per estimates from S&P Capital IQ.
However, Airbus faces significant execution hurdles, primarily stemming from inflexible supply chains. Bottlenecks in manufacturing airframes, cabin equipment, and more recently, engines, have led to the delivery of approximately 30 fewer aircraft than planned for the year. Moreover, the company has deferred its goal of ramping up A320 aircraft production to 75 per month by a year, now targeting 2027. This delay is of keen interest to investors, particularly since the 12-month moving average of monthly deliveries remains below 50, according to a news agency.
The challenges Airbus confronts not only affect its financial outlook but also have broader implications for airline passengers. Continued disruptions in aircraft deliveries are likely to exacerbate an unprecedented increase in ticket prices. These difficulties underscore the intricate nature of the aerospace industry, where scaling production necessitates rigorous training of skilled personnel and meticulous approval processes for components and procedures. Unlike Boeing, which has streamlined aspects of its production, Airbus's current predicament serves as a cautionary tale in managing complex manufacturing operations amidst market pressures.
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