Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Carrots and sticks needed to achieve sustainability goals, says Airbus
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By Tom Batchelor
February 22, 2024, © Leeham News: The sustainability challenge is redefining the aerospace industry in all sorts of ways.
An Airbus A350-1000 is refuelled with a 35% blend of SAF prior to its participation at the 2024 Singapore Airshow’s flying display. Credit: Airbus
For Airbus, which spent €3.2bn on research and development last year, that comes in the form of clean-sheet designs for hydrogen-powered aircraft that promise to reduce in-flight carbon emissions to zero. The European planemaker’s ambition is to bring to market the world’s first such commercial aircraft by 2035.
But Airbus is also working on a successor to the A320 family, referred to as the “next-generation single-aisle” aircraft. At the company’s full-year briefing on February 15, more details were revealed about the aircraft, including confirmation that it would run entirely on Sustainable Aviation Fuel (SAF).
“We’re working on technology to develop the next short-to-medium range aircraft before the end of the next decade, which will be capable of flying up to 100% SAF,” Julie Kitcher, Airbus’ chief sustainability officer, told LNA in Toulouse. “It will be much more fuel efficient, but also feature a new wing design and new materials; we’re working on a lifecycle approach to this aircraft.” Read more
Airbus’s orders at risk
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By Judson Rollins
Introduction
Feb. 19, 2023, © Leeham News: After last week’s release of Airbus’s 2023 financial results, we undertake our annual analysis of at-risk deals on the OEM’s books.
Airbus has outstanding orders from airlines where there is a material probability that some won’t translate into deliveries. Most resulted from airlines with financial difficulties, but some were related to contractual disputes. When deliveries are delayed beyond a set period, usually 12 months, the customer can cancel orders if the delays are unexcused. Boeing flags such orders as subject to an ASC 606 accounting rule adjustment.
Unlike Boeing, Airbus isn’t subject to the ASC 606 accounting standard, so it only discloses the nominal value of its total adjusted order book in its annual report – but not at-risk orders by program.
LNA analyzed Airbus’s order books in July 2020, November 2020, August 2021, February 2022, August 2022, and December 2022 to identify at-risk orders and develop an apples-to-apples comparison. The above links explain our methodology.
Summary
- Airbus is more prone to country- and carrier-specific risks than geopolitical.
- Order risk threatens to push Airbus’s market share even higher.
- Airbus single-aisle order risk is mainly driven by low-cost carrier exposure.
- Widebody order risk is a mix of long-deferred orders and regional problems.
Airbus hails ‘landmark year’ with strong 2023 results amid delivery ramp-up
By Tom Batchelor
February 15, 2024, © Leeham News: Airbus gave more details of its planned ramp-up today as it announced 2023 full-year results, with revenues climbing 11% year-on-year to €65bn and adjusted earnings before interest and taxes (EBIT) up 4% to €5.8bn.
The European manufacturer is targeting 800 commercial aircraft deliveries in 2024, above the 735 delivered last year, an increase of almost 9%. Airbus is seeking a ramp-up in production to meet increased output targets across its commercial division, including 75/mo for the global A320 family program.
Airbus FY 2023 commercial positioning. Click to enlarge. Source: Airbus.
Guillaume Faury, Airbus chief executive officer, told investors that the company was seeking to strike a balance between “very strong demand” for its aircraft and “the ability of the supply chain to meet the demand.”
Faury said 2023 had been a “landmark year” with a “record-breaking level of aircraft orders and backlog”. He added: “We continue to see momentum for civil and defense markets.”
However, the Airbus Defense and Space division continues to struggle with adjusted EBIT down 40% year-on-year, to €229m from €384m.
Across all of its business segments, Airbus said it expects to achieve EBIT Adjusted of between €6.5bn and €7bn in 2024. Read more
Airbus should tread carefully
- Airbus announces is 2023 earnings on Feb. 15.
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By the Leeham News Team
Analysis
Feb. 12, 2024, © Leeham News: United Airlines has reportedly been looking to Airbus to replace the Boeing 737 Max 10s that Boeing is having difficulty delivering, due to the Alaska Airlines accident and the resulting delays in certification to the Max 7, Max 10 & 777X programs. Airbus has been searching for ways to recover/create slots to take on a premium customer and poach them from Boeing.
A320 production rates are headed towards 75 a month in the 2025/2026 time frame, with Airbus confident that its supply chain can meet the demand and will commit to the rate for the long term. These are record production numbers with the previous high-water mark reached in 2019 with 863 total deliveries: 642 of those from the A320neo family, or 54 a month. The A220 program is also headed for an increased production rate of 14 a month at about the same time.
However, Airbus has its own kinks to work out, along with concerns outside its control:
- Geared Turbofan (GTF) on wing engine issues from supplier Pratt Whitney.
- The A220 & A330Neo lines aren’t selling as well as they’d like to
- 2024 US presidential election could really upend the apple cart.
- Another Max accident would be a bad thing, even for Airbus (more below).
There has been speculation and calls for Airbus to push the envelope even more, reaching 90 a month to offset the Boeing shortcomings.
75 & 14 a month are already huge goals and pushing suppliers to go past those targets might compromise quality. People will cut corners when they are greedy. Besides, a little scarcity when you are the top dog isn’t the worst thing; Boeing isn’t coming to the party with anything new in the near future.
Instead of progress, Boeing must deal with new crisis of Alaska Flight 1282 on Wednesday’s earnings call
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By Scott Hamilton and Judson Rollins
Jan. 29, 2024, © Leeham News: Twenty-twenty-four will be a crucial year for Boeing.
A door plug blew off a Boeing 737-9 MAX Jan. 5. The company must deal with the fallout on its 2023 year-end earnings call Wednesday. Credit: Capt. Chris Brady.
An unexpected twist is the crisis from Alaska Airlines Flight 1282, in which a door plug blew off a 737-9 MAX at 16,000 ft. Nobody died, and injuries were light. But the MAX 9 fleet was grounded in the US by the Federal Aviation Administration. The FAA launched a formal investigation into the “quality escape” that is believed to have led to the accident. Last week, the FAA put a freeze on current production rates of the 737 and, for now, killed Boeing’s plans to add a line at its Everett (WA) plant.
Beyond dealing with the 1282 aftermath, Boeing hopes this year to clear its inventory of 737 MAXes and the 787. Clearing the inventories brings cash and some profits. But will this move to the right while Boeing is under even more scrutiny by the FAA?
Boeing planned to be positioned for 2025 to pay down debt incurred during the MAX grounding and the COVID-19 pandemic. Progress toward free cash flow targets of $10bn per year by 2025/26 was forecast at its Nov. 2, 2022, investors day. This is almost certainly inoperative.
ZeroM, Airbus’ effort to reduce traveled work
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By Scott Hamilton
Jan. 16, 2023, © Leeham News: Traveled work is the bane of any airplane manufacturer’s production line.
“Traveled work” is when parts are unavailable when the plane is in final assembly. To keep production moving, the manufacturer—whether it’s Airbus, Boeing, Embraer, or some other firm—notes the missing item and continues production. The airplane is rolled off the line and the work is finished on the ramp when the part becomes available.
Jurgen Westermeier, Airbus Chief Procurement Officer. Credit: Airbus.
The OEMs (Original Equipment Manufacturers) approach the issue differently. Some prefer the parts to arrive “just in time,” which keeps inventory to a minimum. This reduces cash outflow.
But just in time creates the problem of missing parts. One time, Airbus was assembling A320s, and USB ports failed to arrive while planes were on the assembly line. The ports had to be installed later—traveled work.
Another option is to create an inventory. But to minimize the cash commitment, and the space taken up by inventory, the OEMs limit the supply. Airbus, for example, has a “buffer” of between a few weeks and a few months, depending on the parts.
Airbus also attacks the challenge with a program called ZeroM. LNA met last month with Airbus’ chief procurement officer (CPO), Jurgen Westermeier, on the sidelines of the Aviation Forum in Hamburg. He explained ZeroM and how it works. Below is a transcript of our meeting. It has been edited for clarity and space.
Airbus posts record orders in 2023, meets delivery target despite challenges
By Tom Batchelor
January 11, 2024, © Leeham News: Airbus exceeded its target for aircraft deliveries last year and achieved a record number of orders despite what it called a “complex” and “volatile” operating environment, according to the company’s newly released 2023 order and delivery data.
The European planemaker delivered 735 commercial aircraft to 87 customers in 2023, versus 661 commercial aircraft to 84 customers the previous year – an increase of 11%, Figure 1.
Figure 1. A visualization of Airbus orders, deliveries, and backlog in 2023. Click to enlarge. Source: Airbus.
That was above the Airbus target of 720 commercial aircraft deliveries over the 12 months.
Of the 735 deliveries, 68 were from the A220 family, 571 were from the A320 family, 32 were from the A330 family and 64 were A350 family aircraft. Compared with the previous year, A330 and A350 family deliveries were broadly flat, while A220 and A320 family deliveries were significantly higher.
A321 deliveries accounted for 56% of A320 family deliveries. Airbus confirmed the latest variant in that family, the A321XLR, has reached the latter part of flight testing with the first delivery expected in Q2 2024.
The commercial aircraft business registered 2,319 gross new orders (2,094 net after cancellations), putting its 2023 year-end backlog at 8,598 aircraft. This was the first time Airbus has topped 2,000 net orders in a year.
The figure was a sharp increase versus 2022, when there were 1,078 gross commercial orders (820 net), and 7,239 aircraft in the backlog.
For comparison, Boeing data shows it delivered 528 aircraft in 2023 and received 1,456 gross new orders (1,314 net).
Managing supply chain stress continues
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By Scott Hamilton
Jan. 9, 2024, © Leeham News: The COVID-19 pandemic impact on aerospace and its supply chain was deep and long lasting. The airframe and engine manufacturers haven’t fully recovered. Part of the reason is that the supply chain hasn’t fully recovered, either.
LNA attended the Aviation Forum in Hamburg, Germany, last month. On the sidelines of the event, we met with Jurgen Westermeier, the chief procurement officer for Airbus. We discussed the supply chain and other issues. The following is a transcript of this interview. It has been edited for space and clarity.
Related Story:
JAL A350 ground collision is first hull loss by damage and fire of an all-composite airplane
Jan. 2, 2024, (c) Leeham News: Editor’s Note: With the ground collision (Jan. 2, 2024, Tokyo time) of a Japan Air Lines Airbus A350 and its destruction by fire, we’re reposting this article from March 2009. It was then that Boeing was in early production of the 787 and the Federal Aviation Administration was studying what Special Conditions to require in the event of a fire on a composite passenger airliner. The 787 was the first all-composite airliner and how composite of this scale would react in a fire was then mostly known. The only all-composite, large airplane fire had been that of the B-2 Stealth bomber.
Video via Times of London.
LNA spoke with airport fire officials about preparing for a composite airliner fire and we discussed the challenges the US Air Force had in putting out the B-2 fire. Fires occurred on two 787s after entry into service: a JAL aircraft that was parked at the Boston airport after a flight from Tokyo and an Ethiopian 787 parked in London. The JAL fire was traced to a battery. Airport firefighters faced challenges in putting out the fire. The airplane was heavily damaged but repaired. The Ethiopian 787 fire was traced to pinched wires creating a short at the emergency transmitter locator in the top of the fuselage. The plane was heavily damaged but repaired. The JAL A350 is the first hull loss of a composite airliner and the first by fire.
Investigators will learn all kinds of lessons from the A350 accident.
All passengers and crew on the A350 escaped. The five crew on the Japanese Coast Guard airplane involved in the collision died.
The March article is below.
Outlook 2024: Expectations growing at Airbus
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By Gordon Smith
January 2, 2024, © Leeham News: Many businesses start to wind down operations as the holiday season approaches – but for the big OEMs, the year-end usually means a sprint finish. Airbus is no exception.
Speaking to investors in early November, CEO Guillaume Faury reconfirmed the company’s earnings target for 2023 and sounded optimistic about the prospect of meeting its delivery goal of “around 720” aircraft for the calendar year: “We think we are well-placed to deliver around 161 planes to fulfill the guidance. For those deliveries, we obviously have a high degree of visibility on parts, including engines,” he said.
Although the official tally for 2023 is not likely to be published until next week, the latest figures from November offer valuable insight into progress towards the goal. In a December 5 update, the OEM revealed that it delivered 64 aircraft during the previous month, bringing the year-to-date total to 623 examples. This left 97 units to be handed over before the start of 2024.