Shares in Airbus fell by nearly 11% on Tuesday following the company’s announcement of reduced targets for 2024.
The aerospace giant revised its adjusted earnings before interest and taxes (EBIT) to around €5.5 billion ($5.9 billion), down from a previous estimate of €6.5 billion to €7 billion.
This significant adjustment came as a surprise to many investors, leading to a sharp decline in share prices.
Reduced aircraft delivery forecast
Airbus also scaled back its aircraft delivery forecast for 2024. The company now anticipates delivering approximately 770 commercial aircraft this year, compared to an earlier projection of nearly 800.
Additionally, Airbus has delayed the timeline for ramping up production of its A320 aircraft, a key product in its commercial lineup.
At 9:50 a.m. London time, Europe-listed shares in Airbus were down 10.75%, reflecting investor concerns over the revised forecasts and potential long-term impacts on the company’s financial health.
Supply chain issues cited
One of the primary reasons for the downward revisions is ongoing supply chain challenges. Airbus acknowledged persistent issues in its commercial aircraft business, particularly related to engines, aerostructures, and cabin equipment.
These supply chain bottlenecks have been a recurring problem, affecting the company’s ability to meet production targets and maintain cost efficiency.
“Airbus is facing persistent specific supply chain issues mainly in engines, aerostructures and cabin equipment,” the company stated, highlighting the significant impact these problems are having on its operations.
Additional costs in space systems division
Beyond the commercial aircraft sector, Airbus is also grappling with increased costs in its space systems division.
The company recognized “commercial and technical challenges” in this segment, leading to charges of around €0.9 billion in the first half of 2024.
These charges are attributed to updated assumptions on schedules, workload, sourcing, risks, and costs over the lifetime of certain telecommunications, navigation, and observation programs.
Financial outlook and upcoming results
Airbus is set to release its half-year results on July 30, which will provide further insight into the company’s financial performance and future outlook.
Earlier this year, Airbus reported weaker-than-expected operating profit for the first quarter.
Industry implications
The announcement from Airbus comes at a time when the aviation industry is grappling with a complex mix of recovery from the COVID-19 pandemic and ongoing supply chain disruptions.
The aerospace sector has faced significant challenges in maintaining production schedules and managing costs, issues that are now clearly impacting Airbus.
Market reaction
The sharp decline in Airbus shares underscores the market’s sensitivity to changes in guidance and the broader implications for the aerospace industry.
Investors are likely to remain cautious until there is more clarity on how Airbus plans to address its supply chain issues and manage costs in its space systems division.
The post What's going on with Airbus shares? appeared first on Invezz