Airbus' Engine Dilemma: CFM Supplies Achievable, but Tight
Tuesday, Nov 19, 2024 12:35 pm ET
4min read 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.
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.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.