Airline Airbus’s delivery target out of reach

It helps in a cyclical industry, such as making planes, to sell products ahead of a downturn.

After European markets closed on Tuesday, Airbus said it considered its previous target of delivering around 700 commercial aircraft in 2022 to be out of reach, but it believes that the final figure won't fall much short of what was promised.

More planes than anticipated have been stuck in an almost-finished state because of delays affecting a raft of small components. A shortage of raw materials and labor has saddled aerospace suppliers, particularly engine makers, for the past year. More recently, another round of factory shutdowns in China, as well as bad weather stalling flight tests in Europe have added to the woes.

Shares in Airbus fell almost 3% Wednesday. Boeing's American rival closed down 3.6% the previous day.

When he reported third-quarter earnings at the end of October, many sell-side analysts thought Airbus Chief Executive Guillaume Faury should have toned down his delivery aspirations and confirmed their suspicions in recent weeks. The median delivery forecast compiled by Visible Alpha was 698 before the announcement, suggesting that some brokers hoped for a big end-of-year push. There are precedents: In January, Airbus shipped a record 138 aircraft, making it a late comeback. The number needed for this time was 135.

Misses are rare in the aerospace industry. Airbus cut its annual target from 720 in July. On Tuesday, the company guided expectations toward a slower increase in production of its bestselling A 320 narrow-body jet. It still wants to make 75 a month by the middle of the decade, but it will hit a rate of 65 later in 2024 than previously planned.

The delay in 2022 is a part of the delay. It may be that supply-chain normalization, which Mr. Faury hoped would happen by the end of 2023, could take longer.

The news was not bad. Airbus didn't change its financial guidance, suggesting that its accountants were conservative in their planning. Its delivery problems are far less than Boeing's, which is more affected by geopolitical tensions with China and needs to get rid of a huge backlog that has been accumulated over years of technical problems.

Both companies are experiencing the same paradox: orders are surging as the postpandemic travel market booms despite inflation and fears of a recession, but manufacturers are struggling to ship their products to airlines and lessors. Most economists expect a recession in the U.S. and Europe early next year, which has historically hit orders but also deliveries. There is the risk that the downturn won't be deeper than feared, as many outright cancellations seem less likely this time around. Most cash is paid only when planes are delivered.

Airbus and Boeing benefit from years of order backlogs. A short-term headwind could be more than a short-term headwind if you miss the right delivery window to cash in.