Airbus 2019 results hit by A320neo delivery delays

By Bjorn Fehrm 

October 30, 2018, © Leeham News: Airbus announced 3Q 2019 results today. Revenue and profits for the first nine months were up from last year but the company is still wrestling with delivery problems for A320neos from its Hamburg factories. The delays during the first nine months cannot be caught up and the delivery guidance for 2019 is now 860 aircraft instead of 880-890.

Guided free cash flow will suffer as a result while profits for the year are guided unchanged as the first nine months delivered healthy profits.

Airbus is to 76% commercial aircraft, which depends on 74% A320neo deliveries 

Airbus’ revenue for the first nine months was €46.29bn (€40.4bn 3Q2018) with operating profit at €4.1bn (€2.7bn) which is 9% of revenue versus 6.8% a year ago. Free Cash Flow was affected by the A320 delays at -€4.9bn  versus -€4.2 a year ago.

The dominant Commercial Aircraft (76% of revenue) continues its weak order intake with orders for only 127 aircraft during the first nine months. Its strong A320neo program and smooth ramp of the A350 brings it increased revenues,  €35.6bn (€30.5bn) and healthy profits €3.4bn (€2.2bn).

The Helicopter division is flat in a difficult market, compensating with services when deliveries weaken whereas Defense and Space is slightly positive (revenue up 9% at €7.7bn with operating profits slightly down at €355m).

Guidance for 2019 for Commercial Aircraft was adjusted to 860 aircraft deliveries, down from the previous 880-890. Airbus’ free cash flow is now guided at €3bn (€4bn). It maintains profits will increase by about 15% over last year.

Commercial aircraft

The revenue and profit increase was delivered by the A320 deliveries (422 versus 395 last year), the A320neo premium and the A350 program (77 versus 61) no longer eating cash. Total deliveries to date were 571 versus 503 last year. While better than 2018 it still leaves 289 aircraft to deliver in 4Q which is a continued challenge.

Airbus CEO Guillaume Faury said “ “We are focused on the A320neo ramp-up and improving the industrial flow while managing the higher level of complexity on the A321 ACF in particular. Our nine-month delivery numbers and the updated delivery outlook for the year reflect the underlying actions to secure a more efficient delivery flow in the next years as we progress to rate 63 per month for the A320 Family in 2021.”

What he says is its time to stop chasing the yearly numbers at all cost as this hits next year’s numbers and the delivery rat race just goes on. Airbus must come out of heroic fourth quarters saving the results, it can’t be a three-quarter company any longer.

The trade war with the US is a new problem with doubts who will shoulder any import taxes. For existing orders, Gauillame hinted at a split burden whereas new orders will see the customer pay.

The A440M

Ten A400M were delivered with several important capability achievements reached during the nine months (fueling of helicopters, deployments of 80 paratroopers). The program is still eating cash at a higher pace than planned but the program is now in a more stable phase.

22 Comments on “Airbus 2019 results hit by A320neo delivery delays

  1. All this talk of airlines transferring from MAX to neo seem to miss the point that Airbus are struggling to stand still when it comes to their ramp up of the A320. There seems to be consistent and deep rooted problems in producing to the current level never mind to increase it. The sort of volumes suggested by some would create constraints at all levels of the supply chain. Further there seems to be a real issue as to how to change the mix of A320 to A321 going forward. As it stands they have something like 6,600 orders for the neo of which just under 1,000 have been delivered. At current volumes this would suggest that if you were looking for a sizeable order of A321neo your best bet is to buy an existing airline and gain their slots in the queue.

    • Bottom line is it is not easy – at times both have done well but the amount of work to make it so is incredible and one thing going off the rails (let alone all the things in those aircraft) and thud.

      Airbus continues to have my admiration. They pulled the A350 off amazingly but you have all that other stuff in motion that requires the A teams (pun intended) and not all are A team.

      And you can’t control things like P&W with their whole own set of issue or CFM.

    • I didn’t notice until you mentioned it that Airbus A320 Family output has fallen to half their previous numbers!?

      One interesting logistics issues is the hard limitation of the TLS FAL lines to only produce A320. Thus customers upgrading their orders from A320 to A321 also cause a move ( actually a swap) to another production site. incl. diverting parts supply. ( TLS is good for about 18 frames / month.)

  2. Airbus will probably a dissapointing 7.5% growth at 860. Sales have been weak so far, if we ignore Spirit & Indigo. They can’t keep up with demand & Boeing has been making good progress on various terrains.

    • I suspect all of the Big N airframe manufacturers are living in fear of an engine supply disaster (possibly although not necessarily precipitated by an in-flight engine disaster). That is one reason none of them are publicly criticizing their competitors for whatever their current problem area is.

      • Yes, the engines are indeed a bit of a problem apparently, but then there is also the interiors. Last not least it is a question of huge investments in a market that might become a little more difficult in the coming years. If Airbus would be bullish about the next 10-15 years, they would certainly just build another factory or grow capacity at their existing plants.
        I think it’s wise to wait for the outcome of the MAX-crisis and then make the right strategic decisions. For example, if the MAX is not re-certified by EASA, many suppliers will be knocking on Airbus doors. I would expect a big investment in Alabama with a significant increase in production. If on the other hand the MAX will be back in service without problems, then it would be wise to just work through the orders.
        As you can see with the 787, being too optimistic can cause a lot of problems in the long run.
        Finally there is the possibility of the “FSA”. As we have learned Boeing is talking to key customers and I’m sure they again told Airbus. In case Boeing comes up with a mostly CFRP single-aisle plane, Airbus would be well advised not to invest massively in a conventional (aluminum) production capacities. And so forth….
        In the meantime Airbus has all the time in the world to improve production of the A220 (reduction of CFRP-wing production cost?), evaluate alternative engines (Ultrafan, Hybrid,…) and see how the trade war develops.

        • And its looking to be a down sale period.

          None of it stays the same and none of it is easy.

          A lot like riding motorcycles, you need 100% full attention, one miner distraction be it one you caused or inflicted and you get bit.

        • Gundolf, it is indeed wise of them to wait for the fate of the MAX to become clear.

          However I’m not so sure that investment in new plant to make even more A320s is necessarily wasted if they then do a CF single aisle.

          If the MAX is binned and Airbus do decide to up production rates as a result, Spirit would also have found themselves with time on their hands. So they’d be able to pick up A320 fuselage production pretty quickly, not much investment needed. A new FAL would be needed, but that’s fairly readily adapted to different models.

          Airbus’s approach to CF is also elegant. Smaller pieces of CF, favoured by Airbus, are more readily brought into production as the size of plant needed is lower cost than that required to make Boeing’s one-piece fuselages.

          Airbus do seem to be in a very advantaged situation.

        • “In case Boeing comes up with a mostly CFRP single-aisle plane”

          Thats not going to happen. Airlines dont want to pay what it costs to develop and build one, when they have 2 perfectly adequate ( maybe one isnt perfect , just adequate) plane son offer.
          CRFP doesnt deliver outside of say a wing in the single aisle area, but I can see new tech such fibre laminates ( one of which is GLARE) being used in fuselages. The problem is the ‘business case’ or every day terms we understand , selling at a profit per plane .

          • A CFRP plane does not have to have top quality carbon plies everywhere, some areas can do with unidirectional extrusions and other with reused chopped prepreg baked in forms. One of the big advatages with CFRP in narrowbodies is its corrosion resistance. The German car industry uses these lower grades CFRP with high speed hardening epoxies for different models, like the BMW i3.
            If industry is forced to reduce fuel burn by another 15-20% new designs will come before they break even on current models. No Force=No action nor reaction…

  3. I was wondering why first deliveries of the A321XLR is projected only for 2022/23. Could it be that AB is looking at the A380 assembly line as dedicated to the 321XLR in future, and possibly A322, the way the future is looking for the Boeing NMA?

    • “A321XLR is projected only for 2022/23”
      Thats because the delivery slots are all sold out up to that point, some are conversions of existing A321 orders but likely the engineering
      and certification has to follow it course as well

      • If AB could produce say ~10-15 x A321XLR’s per month from a dedicated production line independent of other 320/321 slots it could greatly elevate it’s attractiveness to airlines who need to replace B757’s for example, especially in the absence or delay in the NMA.

        I won’t be surprize if the A321XLR backlog could be around a 1000 units by the time of first deliveries start.

        • The A321 XLR have some major structural modifications that needs to be fine tuned both in design, production and assembly then comes the certification work, so it takes time to do it careful and right.

          • Yes. It was described in LNA as
            “The A321XLR has a maximum take-off weight of 101 metric tons (223,000 lbs). The additional weight required modifications to the A321neo’s landing gear and re-optimized trailing-edge flap configuration to preserve the A321neo’s takeoff performance and thrust requirements.
            The airplane’s advertised range is 4,700nm, some 15% greater than the A321LR.”
            https://leehamnews.com/2019/06/17/airbus-launches-long-expected-a321xlr-with-alc-order-lessor-also-orders-a220-300/

          • I think the XLR new tank and flaps are lighter than the A321NEO’s ACT and double slotted flaps. So likely those will become standard later on.

            Furthermore I believe the 101t MTOW XLR to lay the basis for a capacity for range A322 NEO with the same 101t MTOW, with a decent although not Transatlantic range.

  4. This is a positive for Airbus and a change to more honest and reliable financial statements that marred the prior management. As alluded, Airbus always had its “magical 5th” quarter where is was able, year after year, to deliver a bunch of jets at the end of the fourth quarter often beating Boeing’s already published order tally. By ending this practice, Faury is pointing to a more disciplined company that that will no longer partake in order book spectacle (which in the case of the A380 included a bunch of phantom orders).

    But it sure doesn’t hurt that your competitor’s deliveries and financials are a mess when you decide to mildly revise down your delivery expectations.

    • I really do not get the contention with this “5th quarter” technique.
      There is nothing insidious and/or smoke and mirrors involved.
      ( In contrast to Boeing Bookkeeping Shenanigans 🙂

      Investing some extra effort for a limited time ahead of a deadline works quite well ( cue Airbus ) and indicates some good working climate.
      I suppose Boeing can’t compete in that domain. Management seems to hate the workforce. Which then leads to fandom being derissive.

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