AIR Airbus SE

Jetliner maker tackles production problems as it works through huge backlog of orders

By Olivia Bugault and Doug Cameron 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 1, 2019).

Airbus SE said its quarterly profit increased more than fivefold, driven by a rise in jetliner deliveries that positions the European aircraft maker to overtake Boeing Co. this year as industry No. 1.

The upbeat results come despite production bottlenecks that have hobbled Airbus's efforts to deliver on a backlog of almost 7,300 aircraft. Still, the company wants to boost its output of commercial jetliners after 2021.

The aerospace giant has been struggling to produce more of the largest version of its A321 single-aisle aircraft, and delays in deliveries to customers have aggravated airlines' capacity issues caused by the grounding of the Boeing 737 MAX.

A decadelong order splurge has left Airbus and Boeing with a combined backlog of 13,000 jets.

Airbus delivered 389 planes in the first half, up 28% from a year earlier, and needs to deliver about 500 jets in the second half of 2019 to meet its financial targets.

"While 2019 is another backloaded and challenging year, we are on track, " Chief Executive Guillaume Faury told analysts.

The larger A321 has outsold similar versions of the 737 MAX by a wide margin, and Mr. Faury said Airbus is looking at options to assemble them at its main production facility in Toulouse, France. The narrow-body planes are currently made in Mobile, Ala., and at a plant in Hamburg, which has suffered the most production problems.

With its single-aisle jets sold out through 2024, Airbus has limited opportunities to capitalize on the uncertainty over when the 737 MAX will return to service. It continues to be outsold by Boeing in the market for larger wide-body jets, where orders have slowed sharply over the past two years.

Mr. Faury said Airbus will maintain output of its A350 and A330neo wide-body jets at current levels to avoid "price wars." Boeing recently boosted output of its rival 787.

Airbus is on track to become the largest plane maker by deliveries this year for the first time since 2011. Its 389 deliveries in the first half topped Boeing's 239. The U.S. company had originally targeted 900 deliveries in 2019, but pulled the projection following the MAX's grounding.

The A320 family of single-aisle planes -- which includes the A321 -- accounted for a majority of Airbus's first-half total. The company has boosted monthly A320 production to 60 jets and plans to increase the rate to 63. A further increase after 2021 is under discussion, though engine makers General Electric Co. and Safran SA have so far resisted such a move.

Slower growth in airline traffic has triggered caution among suppliers to both Airbus and Boeing about supporting higher aircraft production.

Airbus reported net profit of EUR1.16 billion ($1.29 billion) in the second quarter, up from EUR213 million a year earlier. Sales climbed 23% to EUR18.32 billion on the increase in jetliner deliveries, as well as a tailwind from the strong dollar. Aircraft are generally paid for in U.S. dollars, and the majority of Airbus's costs are in euros.

Airbus retained its full-year financial guidance based on delivering 880 to 890 jets this year, 80 more than in 2018 -- though hitting its target of EUR8 billion in free cash flow for the second half hinges on sorting out problems with the A321. A surge in free cash flow has helped boost Airbus's share price by about half this year. The stock rose 0.3% to EUR128.06 on Wednesday.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

August 01, 2019 02:47 ET (06:47 GMT)

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