Missed Opportunity – Can Airbus Fix its Supply Chain?

Airbus missed a once-in-a-lifetime opportunity to gain a substantial advantage over its competitor. Boeing was nearly down for the count and a knockout after two 737 MAX crashes, a near third, 787 quality problems, 777X delays, and KC-46A tanker flaws. Boeing changed management and is slowly making a comeback. Meanwhile, Airbus continues to miss its production targets, and it appears to be too late to change the dynamics of the duopoly. Another Likely Missed Target in 2025 In 2024, Airbus was forced to adjust its investor guidance twice, as it reduced its planned output levels to reflect the reality of continued bottlenecks and shortages. Unfortunately, in 2025, things appear to have gotten worse for the aircraft manufacturer. Airbus delivered only 25 new aircraft in January, followed by 40 in February. The following table shows deliveries by month from 2019 to 2025 year-to-date. source: Airbus The company has targeted 820 aircraft for 2025, meaning it will need to deliver an average of 75.5 aircraft per month over the next 10 months. This will be a significant challenge. Since 2021, Airbus has delivered more than 75 aircraft per month in only 7 of the last 50 months. Averaging that level will require an unprecedented uptick in production rates and higher volumes across the board. Unfortunately, given the January and February deliveries, that doesn't appear likely. Even with its target of 820 aircraft in 2025, Airbus remains short of the pre-pandemic production of 866 aircraft in 2019. Can Airbus restore its operations to the more steady production rates pre-pandemic experienced in 2019? The answer is doubtful, as supply chain constraints continue at Airbus. Those constraints include Spirit AeroStructures facilities in the process of Airbus' acquisition. We expect Airbus to be forced to adjust its production guidance downward before mid-year. Their track record in recent years is not strong, and Airbus production by month has not been very smooth. The following graphic shows Airbus production by month for the period 2020-2024, contrasted with production from 2019. The year-end push to make numbers is quite apparent both pre- and post-pandemic. [caption id="attachment_90357" align="aligncenter" width="640"] source: Airbus[/caption] The following table shows how Airbus aircraft deliveries have varied by month over the last few years. Unfortunately, this year’s start is the slowest since 2020. In other words, things appear to be getting worse rather than better for Airbus production, as supply chain constraints persist years after the end of the pandemic. [caption id="attachment_90359" align="aligncenter" width="640"] source: Airbus[/caption] Of course, a steady production rate would make more sense, and with a strong backlog, one would think Airbus could schedule its skyline to avoid early-year slumps and a mad scramble at year-end. As a customer or passenger, would you prefer an aircraft produced during a year-end rush or a more steady-state production process? We’d pick the latter if we had a choice. Airbus management does have that choice and shouldn’t be in a position for December heroics every year. Smoother is better for safety, customers, and suppliers. Are Engines a Major Constraint? In the last couple of years, shortages in aircraft engines forced Airbus to pull forward inventories of engines to meet its planned production schedule. Maintenance and delivery issues with the Pratt & Whitney GTF have been well documented, and delivery limitations of the CFM International LEAP engines, due to supply chain issues, have also restricted supply. Let’s look at the history of these engines to project future demand Airbus looks to deliver its backlog of 8,645 aircraft on the books as of 28 February 2025. Deliveries of Single-Aisle Aircraft by Engine Type The Airbus A220 is powered only by the Pratt & Whitney GTF engine—the P&W GTF and the CFM International LEAP 1A engine power the A320neo family. Examining Airbus's delivery history, the breakdown in deliveries in recent years has favored the LEAP engine over the GTF, except for the A321neo, for which the GTF has a more popular position. With the order trend shifting away from the A320neo to the A321neo in recent years, we expect the GTF to gain a higher share of Airbus single-aisle models in the future at the expense of the LEAP. The following charts show deliveries by model and engine type since the A320neo was introduced in 2017. [caption id="attachment_90360" align="aligncenter" width="640"] source: Airbus[/caption] Historically, the A320 program has always had a choice of engines, with the CFM-56 having an advantage over the IAE V2500 for the A320ceo family and the CFM LEAP and the Pratt & Whitney GTF competing on the A320neo family. The LEAP has an advantage on the A320neo, while the GTF has an advantage on the A321neo. Since the program's inception, the market has changed, from the A320neo being the best-selling model to the A321 family now being the best-selling model, including the A321XL and A321XLR. As a result, the mix of engines changes due to differences in preferences. That will impact engine needs and supply in the future. The Order Book Let’s look at the Airbus order book to determine how many engines are needed and, potentially, which types are needed to fill the backlog. We say "potentially" because some airlines, such as IndiGo and Frontier, have switched engine types as deliveries have been made. We are comfortable with the estimated volume; we are less sure of the engine OEM, although we have adjusted orders based on all known changes in engine type. There is a current backlog of 7,188 A320neo family narrow-bodies, including the following: [caption id="attachment_90361" align="aligncenter" width="640"] source: Airbus[/caption] As we examine the order book, LEAP’s market share appears to be shrinking from its current levels based on historic deliveries, with the GTF gaining additional penetration. This is primarily due to the change in mix, as the GTF has historically outperformed the LEAP on the larger A321 models while the LEAP has dominated the smaller models. Using historic deliveries, we find the overall GTF-LEAP ratio to be close to 50-50 for the engine programs, with a lead for LEAP on the A320neo family and a lead for the GTF on the sole-source A220 family. However, some key airlines' mix of aircraft and preferences is changing. Indigo has switched from Pratt & Whitney to CFM International, the single largest customer to make a switch. Examining the future order book by type and adjusting for engine choices by airline, we have projected the future breakdown by engine type. The following table illustrates the market shift away from the A320neo to the A321neo models. That change in mix favors Pratt & Whitney, which now has the majority of the order book for the A320neo family models. [caption id="attachment_90362" align="aligncenter" width="640"] source: AirInsight estimates[/caption] The current backlog calls for 8,388 GTF engines and 7,004 LEAP engines, which are currently in the Airbus backlog. With production plans calling for 820 aircraft in 2025, of which approximately 83% will be A320neo family aircraft With a current capacity of 1,500 engines per year, CFM International’s popular LEAP engine powers most of the A320neo family fleet, the Boeing 737 MAX fleet, and the COMAC C919 fleet. Planned growth could face market constraints without growth in CFM capacity. Boeing is projecting production rates to reach the current FAA-mandated maximum of 38 737 MAX aircraft per month in the second half of 2025 and hopes that level will be raised later this year. COMAC is projecting an increase from a handful of aircraft to 50 per year for its C919 model. We estimate that Boeing will produce 348 737 MAX aircraft and COMAC 30 C919 aircraft in 2025. That would take up 756 engines, leaving 744 engines available for Airbus A320neo family narrow-body aircraft in 2025. That would be enough for 372 aircraft, likely more than Airbus would produce LEAP-powered aircraft in 2025. So, there is no immediate constraint for the LEAP. Demand for the GTF continues to grow as the preference for A321 over A320 models continues. Projections of 1,000 engines growing to 1,300 by 2027 should provide adequate volume to support A220, A320neo, A321neo, and Embraer E2 requirements. With a current capacity of about 1,100 engines and multiple capacity improvement projects underway, we don’t expect the GTF to be a constraint for Airbus, particularly as the grounding and replacement of components provide better reliability in the existing fleet. With a shortfall in spare engines to keep airplanes flying on time, demand for GTF engines remains relatively high. Nonetheless, P&W can deliver enough engines to meet Airbus's demand for new aircraft while still servicing the aftermarket. With the new GTF Advantage engine being introduced, we would expect an increase in demand at P&W and a corresponding increase in production rates over the next few years. While engines don’t appear to be the major constraint, there has been a shift in market demand away from the LEAP to the GTF at Airbus. Our analysis shows this even with Indigo changing its many aircraft order book from GTF to LEAP. Nonetheless, it does not appear that a shortfall in engines is causing the seasonal production patterns at Airbus. Airbus Guidance on Future Production Airbus continues to provide guidance for growth in production rates, and at the year-end 2024 results, it projected 820 deliveries for 2025, a product rate of 75 for A320neo family aircraft, a rate of 14 per month for A220, a rate of 4 for A330neo, and a rate of 7 moving to 10 for A350. But over the last three years, we’ve seen consistent downward adjustments to projected rates because of supply chain constraints. We don’t believe that has substantially changed. The following table shows actual deliveries and Airbus's future guidance. In our view, we have classic “hockey stick” forecasts that will likely not be achievable. We’ve been looking for signs from Airbus that indicate their forecasts are realistic, but we don’t see the necessary improvements in production and deliveries in 2025. [caption id="attachment_90363" align="aligncenter" width="1033"] source: Airbus and AirInsight estimates[/caption] With a global trade war underway, the Trump tariffs will hurt the industry. The looming Trump recession has caused Delta and United to change their guidance on traffic and revenues, which can only translate to fewer flights and lower demand for aircraft. Unless sane heads prevail, the Trump Slump could quickly expand into the Trump Global Recession. While economists disagree, they understand that consumers ultimately pay for tariffs and that higher prices impede economic growth. With that as a backdrop, it appears that Airbus has missed the opportunity to capitalize on a strong global recovery, now constrained by irrational policies from the White House. Airbus guidance looks more like a hockey stick forecast, as shown in the following chart. Our expectations would be more aligned with continuing the current trend line, which is a bit below Airbus's guidance. The Bottom Line It appears that Airbus will be again constrained in 2025 and unable to produce enough aircraft to satisfy its level of demand. Airbus additions to the backlog match its output 1 to 1 in 2025, resulting in long waits for airlines to obtain aircraft. Airbus's inability to raise production rates during Boeing’s significant downturn has resulted in Boeing leading Airbus in aircraft deliveries in early 2025. While Boeing has not addressed all of its issues, it is aggressively addressing its production quality issues. It will raise its production rate as fast as it can demonstrate strong performance based on key performance indicators. Boeing is already dismantling a shadow factory to retrofit and repair MAX aircraft produced and inventoried during the grounding when it built a large inventory of undelivered aircraft. Having now delivered most of those aircraft, Boeing is in a position to focus on its MAX production levels to increase output. Since the Boeing 737 MAX aircraft are 100% LEAP powered and the Airbus A320neo family aircraft have a choice of engines, it is clear that Boeing is a more critical customer for CFM than Airbus. During the post-pandemic comeback, Airbus had an opportunity to make significant market share gains against Boeing but could not bring on new airline customers. Unfortunately, Airbus did not take bold actions to raise capacity substantially, and its risk-averse management team failed to capitalize on a once-in-a-lifetime opportunity. While Airbus will remain the market leader over Boeing in the narrow-body range with the current series of airplanes, the next generation of aircraft will tell the story of who will become the market leader in the 2040s. Will it be Boeing with the X-66A or Airbus with a possible blended wing design? The future remains grounded in duopoly and growing competition in Brazil and China.

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