Boeing, Airbus orders slump amid supply chain slump

FARNBOROUGH, England — The hundreds of large aircraft orders that have been placed in recent years were absent from this year’s biggest air show. Instead, Boeing and Airbus It will ramp up aircraft production while battling the effects of the pandemic, which has caused production volumes to falter.

Analysts say many of the issues, particularly training for new employees, will likely take years to resolve, creating prolonged headaches for airlines, suppliers and the manufacturers themselves and leading to a shortage of new, more fuel-efficient planes.

“It’s no surprise to the suppliers and the airlines that they say we didn’t deliver on our promises around delivery times and predictability,” Ihsan Mounir, Boeing’s senior vice president of global supply chain and manufacturing, said last week on a panel at the Farnborough Air Show outside London. “So of course people start making their own plans and their own guesses.”

The production roadmap for the coming months was revealed this week. Airbus said on Tuesday that its adjusted profit for the last quarter fell 56% from a year earlier, mainly due to costs in its space business. The European plane maker had already lowered its aircraft delivery targets for this year, saying it was not building planes at the pace it had planned.

Boeing reports earnings before the market opens on Wednesday, and Wall Street analysts expect the company to post losses in the second quarter and possibly the next.

Boeing secured 96 orders and contracts, including previously confirmed sales, at the show, which ended on Friday, while Airbus secured 266, far short of the 826 orders it won at a year ago’s Paris Air Show, which alternates between Paris and Farnborough each year, according to a tally by consulting firm Ishka.

Highlighting the order was Korean Air’s order for up to 50 Boeing widebodies, including the 777X, which Boeing is working to win regulatory approval for. The airline also has Airbus A350-1000 jets on order. With both manufacturers struggling with production crunch, Korean Air CEO Walter Cho joked when signing the Boeing order, “Whichever comes first, whichever comes on schedule, that will be our flagship plane.”

The weak orders during the show come as both manufacturers have largely sold out of narrow-body jets such as the Boeing 737 Max and Airbus A321neo for the last decade or more: Boeing has a total backlog of nearly 5,500 planes, while Airbus has more than 8,000 on order. United Airlines Air India is also ramping up orders for new jets as travel recovers amid the pandemic.

Boeing’s participation in the air show was notably muted, and it didn’t bring any commercial planes for flight demonstrations as it focused on the safety crisis and manufacturing problems. The Arlington, Virginia-based company is trying to ramp up production of its flagship MAX jet to about 38 planes a month, and investors are looking this week for clues about when that goal will be reached.

Airbus unveiled its new ultra-long-range narrow-body aircraft, the Airbus A321XLR, which was certified by European regulators just days before the show started.

While air show attendees typically get a glimpse at a fleet of aircraft that will be flying for decades to come, most industry participants this year were focused on accomplishments over the next few months.

There are also severe shortages of parts, from landing gear to engine components such as high-pressure blades to increasingly complex cabin interiors such as premium seats, that are slowing production, denying airlines access to more fuel-efficient planes and angering some executives.

Christian Schaerer, CEO of European manufacturer Airbus’ commercial aircraft business, said the company was taking a more hands-on approach “than ever before” and had more than 200 supply chain engineers at suppliers.

“Whether our industry is in a boom or bust, the thing we never want to see again is a situation where the supply chain doesn’t believe what we’re telling them,” Scherer told reporters ahead of the show.

Airbus said last month it was lowering its aircraft delivery targets for this year and slowing a planned production ramp, citing “ongoing specific supply chain issues, primarily in engines, aircraft structures and cabin equipment.”

Boeing, meanwhile, is still working to move past a safety crisis caused by a burst door plug in January and a series of manufacturing defects that have slowed production, in addition to supply chain issues.

The sharp decline in air travel caused by the coronavirus has stalled production of new jets as skilled workers have been laid off or taken early retirement, leaving manufacturers with the task of training new workers — a major challenge.

“I think this is a three- to five-year problem,” said Kevin Michaels of industry consulting firm Aerodynamic Advisory. “Wages need to be repriced to make the industry more attractive to workers.”

Boeing’s Muneer acknowledged that low wages are a problem further down the supply chain and said Boeing itself should invest in training its workers.

“There’s no question about that,” he said. “We don’t believe that the smaller suppliers that are essential to the ecosystem can shoulder the burden. We need to get our balance sheets back and do it ourselves at a higher level, and it will pay off.”

Delphine Bazal, head of Airbus’s industrial supply chain and digital division, said more time was needed to train workers new to aerospace, such as “bakers, butchers, people who work in completely different business areas.”

In the U.S., Aerodynamic Advisory’s Michaels predicted that more aerospace jobs will eventually move overseas to “where the workforce is.”

Correction: This story has been updated to correct the airline’s name, “Korean Air.”