October 30, 2019 / 6:38 AM / 21 days ago

Airbus cuts delivery goal on Hamburg plant snags

PARIS/HONG KONG (Reuters) - Airbus (AIR.PA) cut its full-year delivery goal for commercial jets on Wednesday, as the planemaker struggles with production delays at a recently expanded German plant.

FILE PHOTO: An Airbus A220-300 aircraft flies during its unveiling in Colomiers near Toulouse, France, July 10, 2018. Airbus A220 is the new brand for the small CSeries passenger jet acquired from Canada's Bombardier. REUTERS/Regis Duvignau/File Photo

Europe’s largest aerospace group expects to deliver “around 860” airliners in 2019 instead of the 880-890 previously targeted, the company said as it posted 1.6 billion euros ($1.78 billion) in adjusted operating income for the third quarter.

The adjusted operating profit figure rose 2% year-on-year as quarterly revenue fell 1% to 15.3 billion euros and net income rose 3% to 989 million. The group also trimmed its 2019 free cash flow goal to reflect the revised delivery outlook.

Airbus shares were down 2% at 123.28 euros in early trade.

The revised delivery numbers and outlook “reflect the underlying actions to secure a more efficient delivery flow in the next years”, Chief Executive Guillaume Faury said.

Airbus has been wrestling with delays at its Hamburg plant for close to two years as it increases output of the A321 ACF, a version of the jet whose modified fuselage allows for more flexible cabin layouts and extra fuel tanks for longer range.

Aircraft demand remains solid in a challenging environment, Faury said - calling once again for a negotiated settlement to a transatlantic trade dispute that has hit European-built planes with 10% U.S. tariffs, with Brussels poised to reciprocate.

In comments to reporters, the Airbus CEO appeared to leave the door open to sharing some of the tariff burden with U.S. airline customers whose planes were already in the production pipeline for delivery before mid-2020.

“We are managing the situation case-by-case with them to try to overcome the hurdles,” Faury said on a conference call following the results announcement.

The situation “will become much more difficult” if tariffs continue to impact planes delivered in the latter half of 2020 and beyond, he added.

“Tariffs will have to be incurred by customers or airplanes not delivered. It’s really creating tension,” he said.

The reduced goal was “not a huge surprise” in light of weaker January-September deliveries announced earlier this month, Bernstein analyst Douglas Harned said. “A321 ACF challenges are expected to persist, with management hinting that the ramp-up will continue through 2020,” he added.

Influential industry executive John Plueger, the head of Air Lease Corp (AL.N), also said on Wednesday that problems at Airbus’s Hamburg plant were “getting worse, not better”.

Airbus “would not disagree (that) the situation today needs to be improved”, CEO Faury said when asked about Plueger’s comments to the Airfinance Journal Asia Pacific 2019 conference in Hong Kong. “As we’re in the ramp-up, it’s very difficult to recover once we are late,” he added.

To reach its revised 2019 goal, Airbus must still hand over 289 planes in the final quarter, a little short of its record 297 deliveries in the same period last year.

Reporting by Laurence Frost in Paris and Tim Hepher in Hong Kong; Editing by Lincoln Feast and Deepa Babington

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