Airbus Faces Tariff-Driven Headwinds in Already Tense Production Landscape

Airbus, the European aerospace giant, has long been navigating a minefield of supply chain bottlenecks, engine shortages, and geopolitical tensions. Now, as tariffs loom large over its operations, the company’s 2025 targets—820 commercial aircraft deliveries, €7.0 billion in EBIT Adjusted, and €4.5 billion in free cash flow—face fresh challenges. CEO Guillaume Faury has bluntly described tariffs as a “new risk” that adds “complexity” to an already strained system, but Airbus remains defiant in its guidance. The question is: Can it deliver?

Tariffs: A New Layer of Uncertainty

The U.S. and EU’s ongoing trade disputes have introduced tariffs on aerospace components, which Airbus warns could disrupt global supply chains and raise production costs. While the company’s financial guidance excludes tariff impacts, the risks are stark. U.S. airlines like Delta Air Lines have already threatened to defer or reject deliveries of tariff-affected aircraft, risking a 43-plane backlog by year-end.

Airbus’s U.S. manufacturing footprint—Alabama assembly lines for the A220 and A320neo—offers some insulation. Unlike Boeing, which faces higher global supply chain exposure, Airbus can produce certain models domestically to avoid tariffs. This strategic advantage could help it poach market share from Boeing, which is struggling with its own cost issues.

Supply Chain Strains: More Than Tariffs

Even without tariffs, Airbus is battling a host of production challenges. A critical bottleneck involves CFM International’s Leap 1A engines, leaving 25–30 A320neo aircraft grounded at its Toulouse facility. These “gliders” are fully built but engineless, delaying deliveries and raising storage costs. CFM has promised to resolve the shortage by year-end, but delays could push back Airbus’s Q1 delivery count.

Meanwhile, the acquisition of Spirit AeroSystems—a key supplier for the A350 and A220—remains pivotal. Airbus aims to finalize the integration by July 2025 to stabilize production rates. However, logistical hurdles, like relying on Boeing’s IT systems at shared facilities, threaten to delay progress. The deal could temporarily reduce free cash flow by “mid triple digits” in 2025, but long-term stability hinges on its success.

Production Targets: Ambitious, but Fragile

Airbus’s 2025 goals include ramping up A320 production to 75/month by 2027 and A350 output to 12/month by 2028. Yet, current bottlenecks suggest these targets are far from assured. The A350 program’s delays, exacerbated by Spirit’s component shortages, have already slowed progress. Similarly, the A220’s target of 14/month by 2026 is at risk unless Spirit’s integration proceeds smoothly.

Financially, Airbus is walking a tightrope. Its Q1 2025 free cash flow turned negative at €-0.3 billion, reflecting inventory buildups to support production. While its €26.9 billion in net cash provides a buffer, missing delivery targets could erode EBIT margins further—already down 8% year-on-year in 2024 due to defense program charges.

The Delta Factor: A Test of Nerve

Delta’s refusal to absorb tariffs threatens the most immediate risk. The airline’s 43 deferred deliveries—worth an estimated $4 billion—could force Airbus to reallocate aircraft to non-U.S. buyers, complicating scheduling. If other carriers follow suit, the 820-delivery target could slip. Airbus is now exploring workarounds, such as re-registering aircraft in low-tariff regions like Switzerland, but this requires regulatory acrobatics.

Competitive Edge Over Boeing?

Airbus’s U.S. manufacturing base gives it an edge over Boeing, which faces higher tariff exposure and its own supply chain woes. Analysts note that Airbus could capitalize on Boeing’s struggles by offering tariff-free alternatives to U.S. carriers. However, retaliatory EU tariffs on U.S.-made components could offset this advantage, creating a geopolitical stalemate.

Conclusion: A High-Wire Act

Airbus’s 2025 targets are achievable—but only if three key factors align:
1. Tariff Resolution: A U.S.-EU agreement to suspend or revise tariffs would alleviate customer fallout and cost pressures.
2. Supply Chain Fixes: Resolving engine shortages and finalizing Spirit’s integration are non-negotiable for production ramp-ups.
3. Customer Compliance: Convincing Delta and others to accept cost-sharing or alternative solutions will determine delivery counts.

The stakes are enormous. If Airbus meets its 820-delivery target, it could push EBIT margins toward €7.0 billion and stabilize free cash flow. But missing by even 50 deliveries—easily possible if Delta’s deferrals escalate—could slash FCF by hundreds of millions. Investors should watch the Spirit acquisition timeline and Delta’s next moves closely.

As Faury himself put it: “The path forward is clear, but the terrain is uncertain.” For Airbus—and its investors—the next 12 months will test whether clarity can triumph over complexity.