News Backgrounder
Manufacturers chip away at aircraft delivery backlog
Boeing and Airbus have established aggressive goals for aircraft deliveries while the major engine manufacturers struggle to meet targets for both new and in-service aircraft.
September 1st 2018
For a change, Airbus and Boeing are sharing some common ground. Read More » At their respective manufacturing centres in Europe and the U.S. dozens of their ordered jets are parked and unable to be delivered to customers because engines and other aircraft parts are missing production deadlines.
At press time, Airbus had close to 80 of its popular A320neo family aircraft waiting for engines from Pratt & Whitney because the manufacturer had missed delivery deadlines.
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At Boeing in Seattle, at least 40 unfinished B737s and B787s were recently idle while the manufacturer’s engineers dealt with the delivery of parts that had arrived out of sequence from suppliers.
The numbers tell the tale. In July, Boeing delivered 29 B737s compared with 56 in June. In the same month, it sent eight B787s to customers, down from 17 a month earlier, according to order-and-delivery data posted on the company’s website.
Supplier shortages at Boeing and Airbus include LEAP engines from CFM International, a joint venture of General Electric and Safran. Boeing also is suffering from delays and out-of-sequence arrivals of airframes from its subsidiary, Spirit AeroSystems Holdings. Spirit AeroSystems, in turn, is enduring delays from its own supply chain. At Rolls-Royce, in-service issues with the manufacturer’s Trent 1000 engines on B787 aircraft continue to cause angst at the company and with B787 customers.
According to a report last month by Bank of America Merrill Lynch analyst, Ron Epstein, $1.8 billion of B737 inventory is sitting on the tarmac at Boeing’s Renton complex. “The problem may worsen for Boeing before it gets better,” he wrote.
“That said, Boeing is building inventory until it receives engines and other components. Once the parts arrive and deliveries are made, Boeing will have large cash inflows from airline customers and working capital.”
Boeing chief financial officer, Greg Smith, has confirmed the company expected to deliver fewer B737s during the third quarter of this year before accelerating shipments by year end. Speaking at a Jeffries conference, he said work is being done to streamline production and tackle supplier bottlenecks. “We have a recovery plan in place for them and us, and it’s about executing that plan,” he said.
The question of compensation to airlines for late deliveries and the grounding of planes in service will be complicated. Last month Rolls-Royce gave a hint of the costs involved at its second quarter company results announcement.
The Derby-headquartered group has set aside US$1.9 billion to 2022 for the cost of repairs to its Trent 1000 portfolio. More recently, it revealed it was investigating serious issues with compressors in two batches of the engine type.
“We continue to be impacted by the challenge of managing significant Trent 1000 in-service issues and have recognized an exceptional charge of $703.2 million,” said chief executive Warren East.
Fixing the engine faults is estimated to cost Rolls-Royce in excess of $761.6 million by year end, an additional $571.2 million in 2019 and $444.3 million in 2020. In May, the company confirmed it would retrench 10% of its workforce, or 4,600 jobs, to save $508 million annually. A company-wide restructuring is expected to cost $634.6 million to the end of 2020, a figure that will be offset by $508 million in annual savings.
While delivery delays at Airbus remain serious, they are easing. In July, Toulouse announced its second quarter profit had doubled after deliveries of its A320 picked up. Airbus CEO, Tom Enders, said the manufacturer had reduced aircraft waiting on the assembly line for engines from CFM and Pratt & Whitney.
In the first half of this year, Airbus delivered 110 A320neo. “Our operational focus in commercial aircraft remains squarely on securing the production ramp-up,” Enders said. “Neo deliveries surpassed those for the original A320 model in the second quarter and the company stands by a goal of 800 handovers across its full aircraft lineup for 2018 although the target remained challenging.”
