Airbus Shares Plunge as Company Downgrades 2024 Financial and Production Forecasts
Airbus shares took a significant hit, dropping 9.5% on Tuesday following the aerospace giant’s unexpected announcement that it was lowering its financial and production outlook for 2024. Amid ongoing supply chain disruptions, the European aircraft manufacturer revised its expected commercial aircraft deliveries down to 770 from a previous target of 880 for the year.
The company also pushed back its production target for 75 A320 family aircraft per month from 2026 to 2027. Additionally, Airbus announced a charge of approximately €0.9 billion for the first half of the year, linked to risks in telecommunications, navigation, and observation programs. Furthermore, the projected free cash flow has been adjusted downward from €4.0 billion to €3.5 billion.
The revised outlook also sees a decrease in expected profit, now forecasting €5.5 billion down from an earlier range of €6.5 billion to €7 billion. This adjustment represents a growth expectation of 5% for the year, a decrease from the previously anticipated 7%.
Industry-Wide Supply Chain Challenges
The aerospace sector has been grappling with supply chain issues since the pandemic-induced shutdowns in 2020, which drastically reduced air travel and affected manufacturers worldwide. A report from The Air Current highlighted that the number of in-service commercial engines dropped to 41,000 by mid-2020, from around 120,000 in 2019, illustrating the depth of the crisis.
These supply chain issues have persisted, impacting not only Airbus but also its competitors, including Boeing, which has faced its own set of challenges with mechanical failures in its 737 aircraft. Efforts to resolve these issues include Boeing’s potential acquisition of AeroSystems to enhance the safety and quality of its components.
Technical Correction and Market Reactions
The decline in Airbus’ stock price marks a technical correction, with shares falling by approximately 22% over the past three months from a record high at the end of March, to €134.70 per share at the close of trading on Tuesday.
Earlier this year, Airbus reported first-quarter earnings that fell short of expectations, with a 25% year-on-year decrease in operating profit to €577 million. The company also noted a significant cash flow reduction, primarily due to inventory build-ups as it ramps up production across various programs.
Despite the challenges, Airbus CEO Guillaume Faury noted in the earnings call that the company is ramping up production of the A350 jet to 12 units per month by 2028, buoyed by positive order forecasts. However, Faury emphasized that the operating environment remains difficult with no signs of improvement, citing ongoing geopolitical and supply chain tensions.
The recent developments underscore the volatile nature of the aerospace industry, which is still navigating the recovery path post-pandemic while facing new operational challenges.