By Robert Wall and Doug Cameron
Boeing Co. and Airbus SE, swamped with orders for new jets, are
struggling to deliver them all on time -- in some cases angering
customers and delaying payments.
Airbus has missed a number of deadlines for deliveries, forcing
airline customers to find alternatives, change routes or cancel
flights. It has delivered fewer planes than it did by this time
last year, despite promising 80 more this year.
The missed deliveries mean delayed payments, since most cash
changes hands only upon delivery. That has hit Airbus's closely
followed cash flow over the year.
Boeing hasn't missed any deliveries and says it won't. But it is
straining with the same supplier shortfalls as Airbus, particularly
when it comes to engines.
"It is on all of our radars every day," Boeing Chief Executive
Dennis Muilenburg told reporters Sunday at the Farnborough Air
Show, the industry's biggest trade show of the year. The company
has made investments to help manage its suppliers, he said,
including in technology to help monitor their performance.
Those efforts are crucial, he said, with Boeing poised to
deliver more than 800 planes for the first time this year and more
than 900 by the end of the decade.
For years, booming demand for new aircraft has made it more
challenging for jet makers to deliver planes on time to airline
customers. A supply-line crunch for everything from engines to wing
components is now magnifying the strain.
The result: Some airlines have been left waiting for months for
new planes. That has angered executives and, in some cases, even
stranded passengers.
Airbus is late delivering new, A321neo single-aisle jets to
Primera Air, a Scandinavian airline, because of a lack of engines
made by CFM International, a joint venture of General Electric Co.
and Safran SA. The airline has had to suspend plans for some of its
routes, including trans-Atlantic flights from New York and Toronto
to Birmingham, England.
British Airways is waiting for A320neo planes for the same
reason -- no engines. Willie Walsh, chief executive of parent
International Consolidated Airlines Group SA, said he is "clearly
very disappointed with the performance of Airbus." He has had to
rent planes and operate older, less efficient ones from his fleet
as he waits for his new jets to arrive.
CFM, which had fallen behind on deliveries by up to seven weeks,
has started to catch up and will be back on schedule before
year-end, said Sébastien Imbourg, executive vice president for the
engine maker.
Boeing, too, has suffered delays on engines for its 737 Max
planes, though it hasn't yet held up deliveries of planes to
customers. Both jet makers also have been hit by delays for
components used to make wings and fuselages made by Spirit
AeroSystems Holdings Inc., which fell behind because of its own
supply-chain problems.
"The suppliers are saying, 'Houston, we have a problem, we need
to slow down,'" said Eric Bernardini, head of aerospace at
consultant AlixPartners.
Airlines have been left waiting for planes before. Boeing was
late with its then brand new 787 Dreamliner and Airbus with the
A380 superjumbos. But this time it is the scale of production,
rather than issues with assembling new plane designs that is
hobbling the companies.
Boeing, the No. 1 plane maker by deliveries, and No. 2 Airbus
and are on track this year to deliver more than 1,600 airliners in
total, more than double the figure produced in 2000, and both are
expected to add hundreds more to their backlogs this week at the
Farnborough Air Show. The plane makers have been struggling for
years under the surge, and have spent heavily reviewing and
retooling supply lines.
Mr. Muilenburg said the planemaker boosted its 20-year
industrywide demand growth outlook, projecting delivery of 43,000
new commercial planes worth nearly $7 trillion, up from 41,000
aircraft forecast last year. Airbus also recently lifted its
equivalent projection.
The record production pace is due in part to surging demand for
flights. This year is poised to be the ninth in a row of growth in
passenger demand. The International Air Transport Association, an
industry lobby group, forecasts planes will carry 4.4 billion
passengers this year, compared with 2.7 billion in 2010. Amid
higher oil prices, airlines are also eager to update their fleet to
more efficient planes that burn less gas.
Suppliers to Boeing and Airbus have struggled to keep up. Engine
production delays have been among the most painful. At one point
this year, Airbus had more than 100 near-finished planes waiting on
the tarmac for their engines. In the first six months, the company
delivered only 303 jetliners against a full-year target of 800
deliveries, mostly down to late engines.
Airbus Chief Executive Tom Enders this month said meeting the
full-year goal was "doable" but "hard."
Boeing had delivered 378 planes at the midyear point against a
full-year target of between 810 and 815 planes.
Airbus has two engine suppliers for its popular A320neo-family
of new single-aisle planes and both have struggled. CFM remains
behind schedule, Airbus said.
Safran Chief Executive Philippe Petitcolin has blamed the delays
on the joint venture's own supplier issues, particularly with
forgings, often-large metal parts that can be difficult to produce.
The company said it planned to catch up this summer.
Airbus also buys engines from Pratt & Whitney, a unit of
United Technologies Corp. Pratt & Whitney said it held back
deliveries while it fixed design problems that were causing
components to fail early. Pratt & Whitney is now delivering as
planned, according to Airbus.
Pratt & Whitney said it had caught up on delivery
commitments and remained committed to achieving its 2018 goal.
Airbus considered slowing production of single-aisle planes
while the engine makers recovered, but it feared that could disrupt
other parts makers, causing knock-on delays, said Airbus commercial
plane boss Guillaume Faury. Instead, it continued building planes,
Mr. Faury said, gambling engine makers would catch up.
Boeing took a more conservative view on the number of engines
its suppliers could deliver, according to company
representatives.
Spirit AeroSystems, the aircraft fuselage and wing-parts maker,
started sending wing parts for Airbus's long-range A350 jets to its
factory in Scotland via expensive airfreight, to get them there in
time, said Scott McLarty, Spirit's vice president for the U.K. and
Malaysia. After catching up, the parts now are again going by
sea.
Airbus has asked Spirit to keep extra inventory for both A350
and A320 plane parts, Mr. McLarty said. Spirit, to protect its own
production commitments, is asking its suppliers to keep spare
inventory, too. It also has audited vendors to make sure they have
the staff and resources to keep pace, he said, and has started
sourcing parts from more than one supplier.
"The job today is not just about running a factory but running
the entire supply chain," Mr. McLarty said.
The supply-chain woes have trickled down to passengers. Joanna
Barlow and her partner Dan Winyard were due to fly to Boston from
Birmingham, England, next month to visit family on Primera, the
Scandinavian budget carrier. That flight was canceled because
Primera couldn't get its jet on time from Airbus. They rebooked,
but then their return flight was also canceled for lack of
jets.
"You definitely don't expect flights to be canceled," Ms. Barlow
said. "And certainly not because of lack of aircraft."
--Andrew Tangel contributed to this article.
Write to Robert Wall at robert.wall@wsj.com and Doug Cameron at
doug.cameron@wsj.com
(END) Dow Jones Newswires
July 15, 2018 12:44 ET (16:44 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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