Airbus' Engine Dilemma: CFM Supplies Achievable, but Tight

Airbus CEO Guillaume Faury recently expressed cautious optimism regarding crucial engine supplies from CFM International, stating that while they should be achievable, it will be "very tight." This article delves into the implications of this engine supply challenge for Airbus, its market share, and competitive position in the narrowbody market.

Airbus' dependence on CFM engines for its best-selling A320neo family is significant, with CFM supplying around 65% of the order backlog. However, CFM's market share is delicately balanced between Airbus and Boeing's production rates and Pratt & Whitney's contribution to Airbus output. Industry sources reveal that CFM's reluctance to harm Boeing unduly may have hindered Airbus' plans to increase its narrowbody production, forcing the company to delay multi-year hike plans and cut profit forecasts.



To mitigate the risk of further engine supply disruptions, Airbus is implementing several strategies. Firstly, they are diversifying their engine suppliers, with Pratt & Whitney's Geared Turbofan engines now powering around 50% of their A320neo deliveries. Secondly, Airbus is investing in its own engine production capabilities, with the A320neo's LEAP-1A engine being assembled at its Hamburg-Finkenwerder plant. Lastly, Airbus is working closely with CFM to optimize engine delivery schedules and improve communication to ensure timely supplies.



The engine supply situation will impact Airbus' financial performance and stock valuation in the short and long term. In the short term, the "very tight" supplies could lead to slower jet deliveries, impacting Airbus' revenue growth. However, if CFM can meet the targets, Airbus' financial performance may not be significantly affected. In the long term, consistent engine supplies are crucial for Airbus' growth, driving revenue growth and potentially boosting stock valuation.

Geopolitical tensions between the U.S. and Europe could exacerbate the engine supply situation, given CFM's transatlantic partnership. However, Airbus CEO Guillaume Faury's cautious optimism suggests that these tensions are being managed, and the company is working to mitigate any potential impacts.

In conclusion, Airbus faces a delicate engine supply challenge with CFM International, which could impact its market share and competitive position. By implementing strategies to mitigate risks and working closely with CFM, Airbus can navigate this challenge and maintain its leadership in the narrowbody market. Investors should monitor the situation closely, as the outcome will have significant implications for Airbus' financial performance and stock valuation.