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Airbus reports profit decline amid production issues and delivery delays

written by australianaviation.com.au | April 28, 2016

Airbus A350s in formation. (Airbus)

Airbus is banking on a big second half of calendar 2016 after production issues delayed aircraft deliveries and dragged down profitability in the first quarter of the current year.

The company reported net profit of EUR365 million euros for the three months to March 31 2016, down 50 per cent from EUR792 million in the prior corresponding period.

Airbus has been forced to park completed A320neos (new engine option) due to issues with the Pratt & Whitney PW1100G geared turbofan engine. Meanwhile, deliveries of its new A350 widebody have been affected by a shortage of cabin equipment from Zodiac Aerospace.

On the defence side, Airbus was also battling engine problems on its A400M airlifter.

Despite the delays, Airbus Group chief executive Tom Enders said the company was maintaining its 2016 guidance for more than 650 aircraft deliveries in calendar 2016, compared with 635 aircraft in the prior corresponding period.


Further, earnings were expected to be “stable” in 2016 compared with a year earlier.

“2016 turns out to be the challenging year we anticipated,” Enders said in a statement on Thursday.

“Overall, we expect a stable financial performance but deliveries, cash and earnings will be heavily loaded towards the end of the year. And that already shows in our first quarter performance.

“Despite these challenges we maintain our 2016 guidance and also our earnings and cash growth story for the coming years based on our strong commercial order backlog and the robust, well-resourced production ramp-ups underway.”

Qatar Airways has refused to accept delivery of the A320neo because of issues with the Pratt & Whitney PW1100G geared turbofan engine, with the airline’s chief executive Akbar Al Baker threatening to switch engine suppliers to the CFM LEAP 1A should a solution not be found.

The PW1100G currently has to idle for between two and six minutes after start-up before the aircraft can taxi under its own power.

Qatar has ordered 50 of A320neo family aircraft, comprising 34 A320neos and 16 A321neos.

Airbus said it delivered five A320neos in the first quarter to two customers. Lufthansa was the launch customer, while Indian low-cost carrier IndiGo was the type’s second aircraft customer.

“Pratt & Whitney is committed to supplying new engines for aircraft delivery from the summer of 2016,” Airbus said.

“The engines are expected to be delivered to the right level of maturity to enable the neo ramp-up in the second half of 2016. Overall, the A320 ramp-up preparation continues despite temporary supply chain challenges that are expected to be recovered by year-end.”

Meanwhile, the problems at French manufacturer Zodiac Aerospace have left a number of A350s sitting idle at Airbus facilities in Toulouse and Hamburg waiting for toilets, seats and other cabin fittings to be installed.

Airbus said the A350 rampup was “progressing with the focus on bottlenecks in the supply chain, reducing outstanding work and controlling recurring costs”.

“This is increasingly challenging,” Airbus said in its first quarter results. “The target for a monthly production rate of 10 A350s by the end of 2018 remains unchanged.”

And Airbus said it was investigating the A400M propellor gearbox issue that was subject to a recent Airworthiness Directive from the European Aviation Safety Agency.

“A thorough technical and industrial evaluation has been launched to secure both short- and long-term solutions,” Airbus said.

“The expected impact on aircraft in service and how they can be supported, implications on the delivery schedule and ongoing discussions with customers are under assessment.

“At this stage there is not a sufficiently mature view of the technical, commercial and industrial consequences and their potential impact on the financial statements, which could be significant.”

Enders said the issues surrounding the A400M engine was “frustrating” for the company.

“We are now facing a serious challenge for production and customer deliveries of the A400M due to new, unexpected issues on the engine propeller gearbox.”

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