Guillaume Faury, the chairman of the European aircraft manufacturer Airbus, said it several times on Thursday. “Safety and quality are at the heart of everything we do.” And: “Avoiding risks is very important.”
The Frenchman does not mention the name of his major competitor Boeing. And he certainly doesn’t start about the door panel that an Alaska Airlines Boeing 737 MAX lost during a flight in January.
That incident plunged the American manufacturer into a new crisis. Critics accuse Boeing of being too busy ramping up production and paying too little attention to safety and quality control.
On Thursday morning, during the presentation of Airbus’ annual figures in Toulouse, a journalist asked Faury: “Boeing seems too focused on quantity and not on quality. How about you?” Faury answers: “Quantity should never be more important than quality. We do not want to deliver a certain number of aircraft. We want a certain number safe deliver aircraft of the highest quality.”
Yet it is precisely the quantity that will receive the most attention at Airbus on Thursday. In 2023, the group delivered 735 new aircraft. Analysts wondered what goal the manufacturer would set for 2024. The answer: eight hundred. Airbus wants to build “approximately eight hundred” new aircraft this year. Especially the popular A320/A321neos – several of which will be delivered by Transavia and KLM this year – but also the larger A350 for intercontinental flights and the smaller A220 for shorter distances.
Eight hundred is a “safe goal”, according to Faury, but it somewhat disappointed followers. This puts Airbus at the level of 2018 and 2019, before the corona crisis. In total, customers have ordered almost 8,600 aircraft from Airbus. That is the best-filled order book in the history of the European group. Boeing has an order book of 6,200 aircraft.
According to Faury, Airbus is on track to produce 75 aircraft per month of its most popular type, the A320neo and variants, by 2026. Now there are almost fifty.
For comparison: as a result of the incident at Alaska Airlines, Boeing is currently not allowed by the American regulator FAA to make more than 38 aircraft of the 737 MAX. That is the major competitor of the A320neo. First, the American manufacturer must show that it has its production and quality control issues under control. Only then can production increase.
New delays
Airbus reported on Thursday that the new version with the largest company, A321neo XLR (eXtra Long Range) has been delayed again. It will not be delivered until the third quarter of 2024. The British news agency Reuters reported last week that Airbus had informed customers of new delays. Transavia and KLM will not be affected by this, both companies said when asked.
Airbus has 550 orders for the XLR on its books, including from the Indian budget airline IndiGo of ex-KLM CEO Pieter Elbers. The type is special: for the first time, a smaller, cheaper aircraft (with one aisle) can make intercontinental flights, from Schiphol to Paramaribo, or from Delhi to London. These routes have so far been reserved for larger, expensive aircraft (‘wide-bodies’, with two aisles).
Airbus’ conservative production target for 2024 has everything to do with the problems in the supply chain. The company has eighteen thousand suppliers who make all kinds of parts: from large to small, from the engines and the hull to navigation equipment and entertainment systems.
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Faury said in the fall that supply will remain a challenge and he reiterated that on Thursday. “The situation is improving, but we are also asking for more and more. We want to continue to increase production and that keeps suppliers under pressure.”
Not only Airbus is affected by this. The same applies to Boeing and smaller aircraft manufacturers. Suppliers often work for multiple aircraft manufacturers. Spirit Aerosystems – which made the detached panel from the Alaska Airlines flight – works for Boeing and Airbus. The American manufacturer Pratt & Whitney supplies engines to both companies, as does the American-French engine builder CFM International (a joint venture of General Electric and Safran). “The delay among engine manufacturers is a major obstacle to increasing our production,” said Faury.
Increase in turnover, decrease in profit
Airbus reported a profit of 3.8 billion euros on Thursday, a decline of 11 percent compared to the record of 2022. This situation is in stark contrast to that of Boeing, which suffered a loss of 2.2 billion dollars last year (2 billion euros). That was the fifth consecutive year that Boeing suffered a loss. Airbus has been profitable since 2021.
Airbus’ turnover rose 11 percent to 65.4 billion euros. The passenger and cargo aircraft division achieved 15 percent more turnover. This branch represents three quarters of turnover and 78 percent of operating profit.
In addition, Airbus makes helicopters (for military, medical and other tasks) and the company builds defense equipment and satellites. The aerospace branch caused some problems last year, according to Faury. “It turned out to be difficult to predict the costs and production times of the innovative satellites that we make.” Airbus has taken a provision of 600 million euros to deal with the problems with its satellites.
Now that Boeing is struggling and Airbus is flourishing, the balance that has governed global aircraft manufacturing for decades is shifting. Around 2000 it was like this: for every plane Boeing sold, Airbus also sold one. For about five years now it is no longer 1-1 between Europe and the US; it has been 2-1 for a while now. In sales of the most popular type (single aisle, A320neo vs Boeing 737 MAX), the Europeans have a market share of two-thirds, the Americans one-third.
Duopoly can inhibit innovation
The duopoly in aircraft manufacturing is teetering. And more and more airlines are opposing this. They want to purchase new aircraft faster than is currently possible.
Aviation is recovering from the pandemic; The demand for air travel is high in India and China, among others, and the airlines want to be there. But anyone who now orders a new aircraft from Airbus will not receive it until 2030. Boeing – despite all the problems – also has long delivery times.
Analysts fear that an imbalance in aircraft manufacturing will also slow down innovation in aviation. If Airbus can sell so many current-generation aircraft and Boeing struggles to keep up, there may be a need to develop new aircraft.
And new aircraft – powered by hydrogen or electricity – are needed to reduce aviation emissions more quickly. By 2050, the sector has agreed that flying must be climate neutral. Airbus CEO Faury said on Thursday that he wants to launch a hydrogen-powered aircraft on the market by 2035. That will be for ‘the bottom of the market’, or with a limited number of passengers.
Competition in China and Brazil
Although there are competitors for Airbus and Boeing, they are (still) small. The Brazilian Embraer mainly supplies smaller aircraft (for 120 passengers) and does not appear to be planning to scale up. Developing a new (larger) aircraft costs billions.
The Chinese Comac has recently started supplying the C919 to airlines from China. Comac relies heavily on Western suppliers; for example, the C919 has engines from the American-French CFM International. The problems in the supply chain therefore also affect the Chinese. Additionally, the C919 has yet to be certified outside of China. And that could take years.