Delivery problems hurt Airbus and Boeing: The planes can be built, but the engines are not there

glider aircraft manufacturers call them. glider. Special language for new passenger aircraft not yet equipped with engines. The customer, the airline, usually only chooses this at the end of construction.

That order is common. Airlines negotiate separately with engine manufacturers. These are external suppliers such as CFM, Pratt & Whitney or Rolls-Royce. For example, Air France-KLM recently ordered a hundred Airbus A320neos and only later the engines for them from the Franco-American CFM. Once Airbus or Boeing have attached the engines to an aircraft, they are responsible for any scratches.

This practice is now seriously affecting Airbus and Boeing. They only get paid when an aircraft is delivered: no engine (yet) means no money (yet). Acute problems at suppliers such as engine manufacturers – shortages of materials, shortages of personnel, sanctions against Russia – halt production of the world’s largest aircraft manufacturers. Furthermore, they would like to increase it, because demand is increasing. Also see the crowds at Schiphol.

Now that the pandemic seems to be over, the airlines want new planes quickly. They are more economical (important for high petroleum prices) and quieter (less nuisance), and they emit less CO2 than older types.

Unprecedented complexity

Airbus and Boeing’s delivery problems were again evident this week when they presented their half-yearly figures. Airbus – the world’s largest aircraft manufacturer with a 59 percent market share – had 26 gliders at the end of June. They are waiting for new engines at the factories in Hamburg or Toulouse. Guillaume Faury, CEO of Airbus, spoke of a “situation of unprecedented complexity in the world”.

In a telephone comment to analysts on Wednesday evening, Faury said he still hopes to achieve a gross profit of 5.5 billion euros this year even as Airbus cuts production. It is now aiming for 700 new aircraft. Previously it was 720.

In the first half of 2022, Airbus achieved a turnover of 24.8 billion euros in aircraft, helicopters, defense and aerospace equipment. It was 1 percent more than in 2021. Profit fell 15 percent to 1.9 billion euros.

Earlier that Wednesday, Boeing CEO David Calhoun said he wants to deliver more than 400 planes this year. That’s 100 fewer planes than previously reported. Boeing suffered a loss of 1.1 billion euros in the past six months – compared with a profit of 6 million euros a year earlier – on 30 billion euros in revenue (minus 5 percent) in aircraft, defense, aerospace, maintenance and training .

Both manufacturers now mainly sell onceunits, at once. They transport around two hundred passengers over medium distances. The demand for transport on these (tourist) routes, e.g. within Europe or from the US to Mexico, is the first to rise. The (more commercial) intercontinental traffic, on the other hand, is still far below the level in 2019.

Airbus’s bestseller is the A320neo and variants such as the smaller A319 and larger A321. The company earns 50 per month. It should rise to 75 in a few years – when the supply problems have been resolved.

Boeing can’t really compete with that right now. The group mainly sells 737 MAX units. The larger twin-aisle 787 Dreamliner has not yet been delivered due to problems with the US Federal Aviation Authority (FAA).

The MAX was grounded for two years after crashes in Ethiopia and Indonesia, but is back in production after many modifications. Boeing now builds 31 a month. CEO Calhoun does not want to earn more for now, he told the biennial Farnborough Airshow in Britain last week. Calhoun doesn’t like gliders.

The production problems do not only concern engines. For example, Boeing also lacks connectors for the electrical wiring and tape to secure panels.

Use of a second switch or a second roll of tape is not permitted in aircraft structures. For safety reasons, the use of materials in aviation is strictly regulated.

Disrupted trade relationship

The Farnborough Airshow was not just about logistical issues. Boeing also used the show last week to polish its image. It has lost a lot of prestige and market share from Airbus in recent years. The latter is not Calhoun’s favorite topic of conversation. “Right now, market share is less important,” he said in a recent interview.

He prefers to point to the many orders that Boeing received last week. For example, Delta Air Lines ordered 100 aircraft of the type 737 MAX-10, the largest variant of the MAX. Total catalog value (without discount): 13.2 billion euros. Airbus was less generous with press releases from Farnborough.

But the really important deal – which Boeing would be quite disappointed about – Airbus already closed on July 1st. The three major Chinese state airlines have ordered nearly 300 aircraft in the A320 series. For the equivalent of 36 billion euros, China Eastern (partner of Air France-KLM), Air China (with subsidiary Shenzhen Airlines) and China Southern will each receive around 100 aircraft.

The Sino-European deal has been negotiated for years, according to anonymous sources in business papers. The agreement shows the importance of good international relations, said Boeing CEO Calhoun bitterly. Boeing feels victimized by the disrupted trade relationship between the US and China.

uncertainties

Apart from the trade war, the Chinese airlines have previously complained about “uncertainties” with deliveries from Boeing. These uncertainties do not appear out of the blue; it has everything to do with the debate between Boeing and the US Aviation Authority.

Following the MAX-8 crashes, the FAA has yet to certify three new Boeing aircraft types: the smaller 737 MAX-7, the larger MAX-10 and the 787 Dreamliner. Without an FAA stamp – EASA in Europe – a plane is not allowed to take to the air.

If the certification of the MAX-7 and MAX-10 is not completed by December, the US Congress, after investigating the crashes, has required Boeing to redesign part of the cockpit. This will cost the company a lot of time and money.

Production of the 787 Dreamliner – 200 to more than 300 passengers – has been halted for two years due to all kinds of defects. The FAA is critical of the design, partly because it itself came under fire after the crashes of the 737 MAX. The regulator would have trusted the aircraft manufacturer too much.

Boeing chief Calhoun reported Wednesday that the Dreamliner’s certification is “in the final stages.” This is good news for KLM. The Dutch airline already flies eighteen Dreamliners and has ordered ten more. Three 787s have been waiting for KLM at the factory in Charleston, South Carolina. Boeing has earmarked billions to compensate the airlines for the delay.

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