Airbus Navigates Quality Issues Amidst Delivery Rush
As the year comes to a close, Airbus is breathing a sigh of relief after delivering a provisional 123 jets in December, bringing its total deliveries for 2024 to 766. While this marks a 4% increase from 2023, the figure is subject to internal audits and may be adjusted by one or two jets before the final data is released.
Meeting Targets, But at What Cost?
Airbus has been under pressure to meet its targets and deliver on promises to investors after a profit warning in July. However, unions and some airlines have raised concerns that the push to speed up deliveries has come at the expense of quality problems. Malaysia Airlines recently blamed the grounding of a brand new A330neo on quality issues, which Airbus attributed to supporting the airline alongside engine maker Rolls-Royce.
The Art of Compromise
To meet deadlines, planemakers are increasingly compensating airlines for cosmetic defects or paying for extra maintenance if they agree to take jets before deadlines. This practice, known as “concession letters,” can involve tens of thousands of dollars or, in rare cases, up to one or two million for large jets. While there are no suggestions that any glitches involved in end-year delivery negotiations have safety implications, critics argue that over-use can destroy value and affect credibility with airline buyers.
A Pragmatic Approach
Airbus takes a pragmatic view on minor issues to keep deliveries moving and reassure airlines. For example, if a panel has to be replaced, Airbus might guarantee that repairs would not be any costlier than usual. However, this approach has raised concerns among unions over the impact on workers of the delivery scramble.
A New Slowdown Ahead
As Airbus faces a new slowdown in January, traditionally a quieter month for deliveries, the contrast may be starker this year due to fluctuating engine supplies. In November, Airbus averted the risk of a second downgrade in its targets by securing a deal with supplier CFM to divert engines to its assembly lines. However, the head of CFM co-parent Safran has warned that the deal will mean a corresponding drop in supplies to Airbus for January.
Orders and Outlook
Airbus will also report orders for 2024 on Thursday. While it does not publish order targets, sources indicate that it initially aimed for between 1,100 and 1,200 net orders after a record 2,094 in 2023. By end-November, it had reached 742 net orders. As the industry looks ahead to 2025, Airbus will need to balance its delivery targets with quality concerns and maintain credibility with airline buyers.
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