Sunday, April 29, 2018

How Boeing Helped Force Rival Airbus To Cut Production On This Jet

Airbus is cutting production of its A330 jet as it continues to lose orders to Boeing while struggling with soft demand.

And in a double whammy, the European aerospace giant's Q1 earnings were hit by ongoing struggles to get enough engines from suppliers General Electric and United Technologies to meet demand for its hot-selling A320neo. Management admitted Friday it has "plenty to do" to make its annual aircraft delivery target.

Airbus will cut production of the A330 to about 50 planes a year starting next year, down from planned shipments of 60 this year and 67 last year.

It follows major setbacks for the wide-body jet. Earlier this month, American Airlines ordered 47 Boeing 787 Dreamliners in a deal worth $12.3 billion at list prices, turning down offers from Airbus for its A330 and A350. American also canceled an order for 22 A350s that U.S. Airways placed before it was acquired by American.

That followed Hawaiian Airlines' decision in March to order 10 Boeing 787s instead of the A330.

Boeing is also seeing softening demand for its 777 wide-body as customers await the next-generation 777X. Demand for narrow-body jets from both Boeing and Airbus remains high however.

Airbus shares were up 1.1% at 29.29 on the stock market today, working on a nine-week flat base with a 30.68 entry. The relative strength line is also near its all-time high. Boeing was down 0.6% to 340.88, holding above its 50-day moving average.

Airbus also reported a 48% decline in EPS to just 11 cents per share, with revenue diving 10% to $12.43 billion.

"The first quarter performance reflects the shortage of A320neo engines and back-loaded aircraft deliveries as we indicated in the full-year disclosure. This is clearly shown in the financials," Airbus CEO Tom Enders said in a press release. "It's a challenging situation for all but based on the confidence expressed by the engine makers and their ability to deliver on commitments, we can confirm our full-year outlook. This still leaves us with plenty to do this year to reach the target of around 800 commercial aircraft deliveries."

CFM International, a GE-Safran joint venture, is trying to catch up on deliveries for the Leap-1A engine Airbus uses on the A320neo.

Meanwhile, United Technologies' engine-maker Pratt & Whitney has started shipping new geared turbofan engines for the A320neo.

(Michael Larkin - Investor's Business Daily)

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