Tim Hefer
PARIS (Reuters) – Engine maker CFM’s wariness about significantly increasing deliveries to Airbus at a time of stress for another key customer Boeing (NYSE:) was likely a factor in Airbus delaying a planned increase in aircraft production, industry sources said on Tuesday.
Airbus on Monday delayed years of narrowbody jet production growth, slashed profit forecasts and slashed its 2024 delivery plan, blaming a shortage of engines and other parts, and shares in Europe’s largest aerospace group fell on Tuesday.
CFM, a transatlantic venture between GE Aerospace and a French company. Safran (EPA:), makes the LEAP engines that power all Boeing 737 MAX aircraft and generally just over half of the rival Airbus A320neo family, where they compete with geared turbofan engines from subsidiary RTX Pratt & Whitney.
Airbus is seeking to increase production to meet demand despite skepticism from many suppliers about its production plans.
Negotiations to secure enough engines by 2025 to maintain previous targets stalled after Airbus asked CFM to increase its share of narrowbody aircraft deliveries to offset production problems at Pratt, the sources said.
Airbus had hoped CFM would increase its share of Airbus production to about 75% of A320neo deliveries from the current 60%, two people familiar with the matter said.
This has raised industry questions after shipments of CFM engines had already fallen in the current quarter after flat performance in the previous three months, industry sources said.
But Airbus’ request also put the world’s largest engine maker in an increasingly delicate strategic position ahead of its 50th anniversary, as it threatened to compound serious headaches for its other major client, Boeing.
CFM’s market share depends on a triangle of factors: Airbus’s production level, Boeing’s production level, and CFM’s competitor Pratt & Whitney’s contribution to Airbus’s production.
Before the pandemic, they were roughly in balance, although CFM’s share of Airbus’s deliveries had been steadily rising amid industrial problems at its rival.
Now the industry faces not one but two ongoing challenges: an in-flight accident that has slowed Boeing’s recovery from previous safety crises and chronic bottlenecks at Pratt and Whitney. And the sheer scale of the disruption to the usual balance of power between the leading players forced CFM to produce more.
Airbus, on the other hand, is trying to meet demand. With Boeing still maintaining low rates, this meant a crushing advantage for its European rival if CFM could supply it with all the engines it needed.
“CFM will try to accommodate both sides, but ultimately will never do anything that would structurally disadvantage Boeing,” said its first and largest partner, a senior industry source.
Another person familiar with the engine maker said its reluctance to cause undue harm to Boeing may not have been articulated directly with Airbus, but was factored into internal discussions.
“CFM will certainly try to put the brakes on Airbus,” the source said.
Airbus said it does not comment on confidential negotiations with suppliers. CFM did not respond to questions about the relative size of deliveries to customers, but said it was working to meet demand from Airbus. The company has repeatedly stated that it does not support either Boeing or Airbus.
“LOYAL SUPPORT”
Founded in 1974, CFM was the brainchild of industrialists with a colorful military background: the German-born fighter engineer who fought for the Allies, Gerhard Neumann, and the French resistance hero René Ravaud, who lost an arm during the British bombing of Brest.
Little known to the public, it has sailed unnoticed through the industry’s biggest battles, including the trade war between its clients Airbus and Boeing and turbulent transatlantic trade ties.
At an anniversary ceremony in early June, Safran’s chairman pointedly reminded an audience including French Finance Minister Bruno Lemaire and senior Boeing executives of Boeing’s importance to CFM and the French aerospace industry.
Speaking in the gilded state rooms of France’s former naval ministry, Ross McInnes said: “We have steadfastly supported Airbus and Boeing through both their ups and downs, and through the ups and downs of the transatlantic relationship. The success story wouldn’t be like this. something else is possible.”
Senior Airbus officials were not present at the event, which coincided with management talks at the Berlin air show.
On Tuesday, as Airbus shares fell 11% due to production delays and unexpected allegations in the space business, another executive summit was held in a somber atmosphere at its Toulouse headquarters, insiders said.
CFM must agree engine supply volumes some 18 months in advance, so mid-2024 loomed as the deadline for clarity on 2025.
On Monday, Airbus Chief Executive Guillaume Faury acknowledged that 2025 was not set in stone but sought to limit concerns about ramping up growth.
“In terms of 2025 supply levels, we have what we need in terms of commitment from engine manufacturers,” he told analysts.
“That doesn’t mean we’re fully committed to the final volumes we’ll retain, but we have everything we need to support their ramp-up in ’25. That’s what’s important to me.”