02/11/2022

OEM earnings calls: Airbus sticks with 2022 delivery targets, Boeing looks at clearing inventory

OEM earnings calls: Airbus sticks with 2022 delivery targets, Boeing looks at clearing inventory

Engine supply problems are the primary constraint to increasing Boeing 737 MAX delivery rates, Boeing CEO David Calhoun told analysts on the manufacturer’s recent Q3 earnings call. Calhoun also confirmed that 138 737 MAX aircraft originally destined for Chinese customers were now in Boeing’s inventory and they continue to be remarketed.

Meanwhile, rival Airbus has stood by its delivery targets for the remainder of the year and subsequent plans to ramp up production – despite what both OEMs’ CEOs acknowledged continues to be a constrained supply chain environment.

 

Airbus in year-end rush to finish

 

Airbus is sticking to its target of delivering 700 aircraft by the end of 2022, meaning the manufacturer has 265 aircraft to deliver in Q4 – an average of 88 per month. Airbus CEO Guillaume Faury conceded the Q3 delivery performance was “not so strong,” something he unsurprisingly attributed to the supply chain crisis, but insisted that the Q4 delivery quota was “doable”.

“We have, again, a bit like in ’18 ‘19, a significantly back-loaded end of the year. That's not what we like, we prefer a more normalised and linear year, but that's where we are,” Faury told the call. The Airbus CEO also predicted that 2023 would have a similar back-loaded look, as he did not anticipate the supply chain to normalise before the middle of next year.

Nevertheless, Airbus is also standing by its commitments to ramp up Airbus A320 Family production to a monthly rate of 65 aircraft in early 2024 and 75 in 2025. The manufacturer is also making efforts to ensure its A320 Family production lines are capable of producing the larger A321neo – a variant which has proved hugely popular among customers, resulting in a higher-than-anticipated proportion of Airbus’ backlog.

On the widebody side, Airbus said that it was approaching a production rate of three Airbus A330s per month, and was anticipating moving from five to six Airbus A350s per month in early 2023. The manufacturer is also exploring the feasibility of further ramp-ups in widebody production in conjunction with its suppliers. Faury refused to be drawn into reacting to comments by Calhoun implying he doubted that Airbus had the capabilities to meet the entirety of the widebody demand in China, saying that he had not yet had time to look at what was said.

Boeing begins to clear large inventory

 

Boeing’s earnings call was dominated by discussion on the supply chain crisis, production and delivery expectations, and the ever-present questions surrounding the manufacturer’s future in the Chinese market. Calhoun laid the blame for production delays squarely at the feet of engine supply problems, describing it as the “primary constraint” to 737 production rate stabilisation and subsequent increases. He dismissed suggestions from analysts that engine problems were being felt more prominently by Boeing than rival Airbus. “With respect to maybe suggestions that they're not having any trouble, that's not what the industry tells us,” said Calhoun.

Progress is being made with engine suppliers in tackling the engine scarcity and supply chain problems as a whole, he said, although he warned that developments would take time. “We are on the same page […] we're not being surprised as frequently as we used to be.”

All eyes have been on 737 MAX delivery rates, as Boeing looks to ramp up production from the lows of the type’s grounding in a challenging environment. Boeing ended Q3 with 270 MAXs in its inventory – down 20 versus Q2. Of the MAX aircraft in inventory, 138 were initially due for Chinese customers who are unable to take delivery of them pending clearance by local regulators. Thirty-five MAX aircraft in total were delivered from storage over the quarter.

While Calhoun said that he remained hopeful that the issues preventing Chinese deliveries would be resolved, he conceded he did not see this happening in the immediate future. “I have not gotten a single signal, and I'm surprised by it, that they're going to take deliveries in the near term,” he told analysts on the call.

Boeing also has 115 Boeing 787s in inventory, after nine were delivered during the quarter. Deliveries of the type have only recently resumed, and Boeing stated that it anticipates the stored aircraft to be delivered to customers over the next two years.

Other earnings release highlights

  • Airbus Commercial reported Q3 revenues of EUR 9.121 billion ($9.069 billion), a 34% increase on Q3 2021
  • Boeing’s Q3 revenues stood at $6.263 billion, a 40% increase on Q3 2021, driven by the resumption of 787 deliveries and higher 737 deliveries
  • Boeing Commercial experienced operating losses of $0.6 billion, due to “abnormal costs and period expenses.”

 

The Ishka View

 

Once again, the supply chain crisis and what it means for production and delivery rates was a key topic of discussion for both OEMs. The Airbus and Boeing CEOs each acknowledged the difficulty of the current environment but sought to assuage concerns by highlighting their ongoing work with suppliers.

Airbus has set itself a large task with keeping to its 700-delivery target for 2022, but is sticking to its guns. With 435 aircraft delivered year-to-date, 265 in the last quarter is a large step up.

Boeing confirmed it continues to remarket MAX aircraft originally destined for Chinese customers, and still has a large number of both 737s and 787s built but in inventory. Calhoun was keen to play this as a strength, saying that the number was “an asset, not a liability.” The CEO expressed his confidence that there was “a big market” for the aircraft - however, with Boeing predicting that some of the inventory MAX aircraft could take until 2025 to clear, it leaves the OEM with a long, and potentially distracting, remarketing project.

 

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