Airbus Faces Competitive Pressure and Lowers Forecast Amid Chinese Competition
Airbus, one of the leading aircraft manufacturers, has announced a significant reduction in its delivery forecast for this year. The company now expects to deliver 770 jets instead of the previously forecasted 800. This adjustment comes amid increasing competition from China’s Commercial Aircraft Corporation (Comac) and ongoing supply chain issues.
The Rising Challenge from Comac
Comac, backed by significant state support and a robust domestic market, is gearing up to expand its aircraft exports. This poses a direct challenge to Airbus, compelling the European aerospace giant to implement cost-cutting measures and improve productivity. In response, Airbus has announced a hiring freeze and potential job cuts to manage expenses more effectively.
Airbus’ Strategic Adjustments
To combat the rising competition and internal challenges, Airbus has made several strategic moves:
- Reduction in Deliveries: Airbus has lowered its forecast for 2024 deliveries from 800 to 770 jets due to persistent supply chain issues, particularly in engines, aerostructures, and cabin equipment.
- Cost-Cutting Measures: The company is implementing cost-reduction strategies, including a hiring freeze and potential job cuts. While a formal redundancy program will not be implemented, the total number of jobs and white-collar positions will be capped.
- Operational Efficiency: Airbus aims to enhance productivity to maintain its competitive edge. This includes increasing the production rate for the A350 to 12 aircraft per month by 2028, supported by investments in its productivity system.
Financial Implications
Airbus’ financial outlook for 2024 reflects the challenges it faces:
- Revised Growth Forecast: The yearly growth forecast has been reduced from 9% to 5%.
- Lowered Operating Income: The underlying operating income forecast has been revised to €5.5 billion, down from the expected range of €6.5 billion to €7 billion.
- Q1 2024 Results: Airbus reported Q1 2024 revenues of €12.8 billion, a 9% increase from €11.8 billion in Q1 2023. However, EBIT dropped to €577 million from €773 million in the previous year.
Airbus CEO’s Remarks
Guillaume Faury, Airbus’ CEO, commented on the company’s performance and future plans: “We delivered first quarter 2024 results against the backdrop of an operating environment that shows no sign of improvement. Geopolitical and supply chain tensions continue. In that context, we delivered 143 commercial aircraft.”
Faury also highlighted the strong order intake and the company’s decision to increase the production rate for the A350, emphasizing Airbus’ commitment to maintaining momentum despite challenges.
Investment in Sustainability
Airbus is also focusing on sustainability initiatives. The company has partnered with Iberia, Air Nostrum, Aena, Exolum, and Repsol to develop Spain’s first hydrogen airport hub. Karine Guenan, Airbus’ Vice President of the ZEROe Ecosystem, stated, “At Airbus, the decarbonisation of aviation is one of our most important goals. Given Spain’s great potential in renewables and low-carbon hydrogen production, it is essential that the aviation industry collaborates to secure a future end-to-end hydrogen supply chain up to the airports.”
The Competitive Landscape
The competition from Comac and the potential rebound of Boeing add pressure on Airbus’ profit margins. Comac’s strategic state support and focus on international expansion could reshape the competitive dynamics in the global aerospace market.
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