Airbus Still Struggling to Hit Delivery Targets -- 2nd Update

By Robert Wall Features Dow Jones Newswires

European plane maker Airbus SE faces another year of scrambling to meet full-year delivery targets after falling behind in the first three months because of problems with a key engine supplier.

Continue Reading Below

Airbus expects to build a record 720 planes this year including 200 of its new A320neo single-aisle jet. But it only delivered 26 of those A320neo airliners in the first three months, fewer than expected, Chief Financial Officer Harald Wilhelm said Thursday.

A rush to the finish line is nothing new for Airbus, the world's No. 2 plane maker behind Boeing. The Toulouse, France-based plane maker was forced to crank out a record number of planes in December to meet its full-year target after it fell behind earlier. Airbus was hoping this year would be less of a wild ride, even if it projected in January most plane deliveries would fall in the second half.

Pratt & Whitney, a unit of United Technologies Corp., has had to replace faulty engines, called the geared turbofan, on some A320neo planes already delivered to airline customers, which has reduced the number of turbines available for new airliners. United Technologies Wednesday said 26 of 70 geared turbofans delivered last quarter were used as spares.

Mr. Wilhelm said it was a "tough quarter" for the Pratt engine and that the demonstrated performance was "not satisfactory." Airbus is sticking to its A320neo plane delivery target for now, he said, but still is awaiting proof from Pratt that the engine issue will be fixed as promised.

United Technologies Chief Executive Gregory Hayes said fixes to the engine were either approved or in development and that additional tests were being performed to identify any other potential faults early. He acknowledged the reliability issue was painful for customers. The company stuck to its target of building 350 to 400 geared turbofan engines this year, also for other plane makers.

Continue Reading Below

JetBlue Airways Corp. this week said it would swap some A321neo planes due to arrive next year for an older version with a different engine, calling the move "good contingency planning."

Airbus also gets A320neo engines from a joint venture of General Electric Co. and France's Safran SA. Each engine supplier is expected to power about half the planes due for delivery this year.

French cabin interiors specialist Zodiac Aerospace SA also has been a longstanding headache for Airbus. The supplier is behind on building seats and toilets for the Airbus A350 long-range jet. Only 13 A350s made it to customers in the first three months. Airbus is expected to deliver around 80 such planes this year.

Mr. Wilhelm said the situation was improving even if seat supply issues remain. Despite slow deliveries of the new A350, Airbus said it remained on track to start producing 10 of them a month at the end of 2018.

Airbus and Boeing also are grappling with demand weakness for some of their long-range planes. American Airlines Group Inc. Thursday said it pushed back the start of delivery of its A350s from Airbus to late 2020 from 2018. It also delayed some Boeing 787 Dreamliners. Delta Air Lines Inc. this month said it was reviewing widebody plans.

Airbus reported a sharp drop in first-quarter profit, hobbled by delivery of less profitable planes and higher costs on new models even as its net result benefited from the sale of some defense activities. The company's closely watched earnings before interest and taxes stripping out some one-time items fell 52% to EUR240 million ($261.7 million). Airbus delivered 136 planes in the first three months of 2017, 11 more than a year earlier, but those included less-profitable versions.

Net profit rose 52%, boosted by a EUR560 million gain from the divestment of Airbus's defense electronics unit.

Airbus CEO Tom Enders said the company was on track to meet full-year targets.

Robert Stallard, an analyst at Vertical Research Partners, said "there is still a lot of work to be done to hit the 2017 targets."

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

April 27, 2017 09:40 ET (13:40 GMT)