Engine Shortage From Boeing Woes Hits Airbus Production Plans

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Engine manufacturer CFM’s caution in ramping up supplies to Airbus, amid its commitments to Boeing, is believed to have influenced Airbus’s recent decision to delay its planned increase in jet production, according to industry sources.

On Monday, Airbus announced a delay in its multi-year increase in narrowbody jet production, reduced its profit forecasts, and trimmed its 2024 delivery target. The company attributed these changes to shortages of engines and other components, which led to a significant drop in its shares.

CFM, a joint venture between GE Aerospace and France’s Safran, manufactures LEAP engines that power all Boeing 737 MAX jets and just over half of Airbus’s A320neo family. The remaining A320neo engines are supplied by Pratt & Whitney, a subsidiary of RTX. Airbus has been pushing to ramp up production to meet high demand, but many suppliers have expressed skepticism about the feasibility of these plans.

Negotiations between Airbus and CFM hit a roadblock when Airbus requested CFM to increase its share of narrowbody deliveries to compensate for issues at Pratt & Whitney. Airbus hoped CFM would raise its share to around 75% of A320neo deliveries, up from the current 60%. However, this raised concerns due to a recent decline in CFM engine deliveries.

The pressure on CFM to meet Airbus’s demands comes at a challenging time, as the engine maker is already facing significant issues with Boeing. The balance between Airbus’s and Boeing’s production rates is delicate, with CFM needing to manage its commitments to both. Before the pandemic, CFM’s market share was balanced between the two manufacturers, but the current disruptions have intensified the pressure on CFM.

Airbus’s aggressive production targets and Boeing’s ongoing struggles have created a scenario where CFM must navigate its relationships with both companies carefully. A senior industry source indicated that while CFM aims to support both Airbus and Boeing, it will avoid actions that could significantly disadvantage Boeing. Another source confirmed that CFM’s internal discussions are heavily influenced by the need to maintain a balance between its two major customers.

A CFM spokesperson commented, “The supply chain environment remains challenging and we are working to meet LEAP engine demand from all our customers,” emphasizing the company’s neutral stance. Airbus declined to comment on confidential supplier discussions.

According to Rob Morris, global head of consultancy at Cirium Ascend, CFM engines make up 65% of Airbus’s A320neo-family order backlog where an engine choice has been made and accounted for 50% of Airbus narrowbody deliveries in 2023.

CFM, established in 1974, was the creation of industrialists with notable backgrounds—Gerhard Neumann, a German-born engineer who fought for the Allies, and French resistance hero Rene Ravaud. The company has successfully navigated numerous industry challenges, including trade wars and transatlantic tensions.

Safran’s chairman recently highlighted the importance of Boeing to CFM during a ceremony attended by French Finance Minister Bruno Le Maire and Boeing executives. The event underscored CFM’s longstanding support for both Airbus and Boeing. Notably, top Airbus officials were absent from this event, coinciding with internal management discussions at the Berlin Airshow.

With Airbus shares down 11% following the production delays and a surprise charge at its Space business, the company held another executive summit at its Toulouse headquarters in a notably somber atmosphere.

CFM must finalize engine volume agreements approximately 18 months in advance, making mid-2024 a critical deadline for securing commitments for 2025. On Monday, Airbus CEO Guillaume Faury acknowledged that 2025 volumes were not yet confirmed but expressed confidence in the support from engine makers for the planned ramp-up. “When it comes to the 2025 volumes, we have what we need in terms of commitment from the engine makers,” Faury stated, aiming to reassure stakeholders about the production targets.