London
Airbus announced a new cut in production of its slow-selling A380 superjumbo, casting further doubt over the flagship programme’s future, while warning that engine glitches are still weighing on deliveries of the single-aisle A320 that’s due to become its largest-volume model.
The A380 build rate will be reduced to eight jets a year in 2019, down from 15 this year and 28 in 2016, Airbus said Wednesday. While the company aims to eke out the backlog in anticipation of revived demand as airports get busier, it said the handful of ongoing contract negotiations may not produce sales.
“Even if we should get another order before the end of the year that will not change the needle on our rate decision, except if we would get an unexpectedly high order, Chief Executive Officer Tom Enders told reporters.
Continuing issues with the revamped A320neo version of Airbus’s narrow-body workhorse remain a major concern, Enders said, with fixes developed by engine supplier Pratt & Whitney proving unreliable under operating conditions.
Earnings
The company also took a charge against cost overruns on the troubled A400M military-transport plane. The European plane maker said Thursday that net profits fell 17 per cent to 1.5 billion euros ($1.8 billion) in the first half of the year due to problems with the engines for the new version of its top-selling A320 jet. Airbus’s second-quarter earnings before interest and tax fell to 859 million euros from 1.18 billion euros a year earlier, excluding one-time items. “The commercial aircraft environment remains healthy while the robust order backlog continues to support our production ramp-up plans. However, we are facing challenges due to ongoing engine issues,” Enders said in a statement.
The company said its expects to “deliver more than 700 commercial aircraft which depends on engine manufacturers meeting commitments”.
Winglets
The A380 was already due to see production cut to one aircraft a month from next May, and the reductions mean that it is no longer breaking even on a per-plane basis. The company has long since given up on recouping the programme’s 25 billion euros in development costs.
Airbus last month offered an enhanced version of the A380 featuring fuel-saving winglets, which combined with an already-announced layout revision accommodating 80 more people would shave 13 per cent from per-seat costs. Emirates, the leading superjumbo buyer, is exploring the upgrade with a view to buying 20 planes, though Tim Clark, its president, had wanted a more significant upgrade featuring new engines.
Airbus stood by its full-year forecast for a mid-single-digit percentage gain in earnings, free cash flow matching the 1.4 billion euros achieved in 2016, and 700 jetliner deliveries, though Enders said that depends on engine suppliers “meeting their commitments.”
The issues with Pratt’s geared turbofan mean that delivering the close to 200 A320neos targeted — of which just under half are powered by the United Technologies Corp. division — has become “more challenging,” Airbus said. It handed over 59 Neos in the first six months.
‘Maturity issues’
“There are just too many maturity issues on this engine,” Enders said. “That is frustrating for us, that’s frustrating for the customers. We have too many removals of engines on aircraft that are in service. The situation for us all is very unsatisfactory.”
While the handover of Pratt-powered Neos was initially held up by cooling problem that required airlines to delay start-up in hot conditions, the latest glitches concern issues spanning bearings to the combustion chamber and plates, the CEO said.
