Analysis-Engine maker Boeing's dilemma helped slow Airbus production plans By Reuters

By Tim Hepher

PARIS (Reuters) – Engine maker CFM's caution about significantly increasing supplies to Airbus at a time of stress for its other key customer, Boeing (NYSE:), was likely a factor in Airbus' decision to delay planned increases in aircraft production, industry sources said on Tuesday.

Airbus on Monday delayed a multi-year increase in narrowbody production, slashed profit forecasts and slashed its 2024 delivery target, blaming a shortage of engines and other parts and sending shares in the largest aerospace group tumbling. from Europe on Tuesday.

CFM, a transatlantic company of GE Aerospace and the French safran (EPA:), makes LEAP engines that power all Boeing 737 MAX aircraft and, typically, just over half of the Airbus A320neo family, where they compete with RTX subsidiary Pratt & Whitney's Geared Turbofan.

Airbus is racing to increase production to meet demand amid skepticism from many suppliers about its production plans.

Negotiations to secure the necessary number of engines by 2025 to keep previous targets on track hit a snag after Airbus asked CFM to increase its share of narrowbody deliveries to offset industrial problems at Pratt, they said. the sources.

Airbus expected CFM to increase its share of Airbus production to the equivalent of about 75% of A320neo deliveries from about 60% currently, two people familiar with the matter said.

This raised doubts in the industry after deliveries of CFM engines had already fallen in the current quarter, following a 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 worsen the serious headaches of its other major customer, Boeing.

CFM's market share depends on a triangle of factors: Airbus' production rate, Boeing's production rate, and the contribution of CFM's rival, Pratt & Whitney, to Airbus' production.

Before the pandemic, these were roughly in balance, although CFM's share of Airbus deliveries was steadily increasing amid its rival's industrial problems.

Now, the industry faces not one but two ongoing problems: an in-flight explosion that slowed Boeing's recovery from previous safety crises and chronic bottlenecks at Pratt and Whitney. And the sheer magnitude of the disruption to the usual balance of power between major players has put CFM under pressure to produce more.

Instead, Airbus is racing to meet demand. With Boeing still maintaining low rates, that portended an overwhelming advantage for its European rival if CFM could give it all the engines it needs.

“CFM will try to accommodate both sides, but ultimately will never do anything to structurally disadvantage Boeing,” said its first and largest partner, a top industry source.

Another person familiar with the engine maker said its reluctance to unduly harm Boeing may not be articulated directly with Airbus, but rather weighed in internal discussions.

“CFM will certainly try to stop Airbus,” the person said.

Airbus said it does not comment on confidential conversations with suppliers. CFM did not respond to a question about the relative size of deliveries to customers, but said it was working to meet Airbus demand. He has repeatedly said he favors neither Boeing nor Airbus.

'Unconditional support'

Founded in 1974, CFM was the brainchild of industrialists with colorful war backgrounds: a German-born combat engineer who fought for the Allies, Gerhard Neumann, and French resistance hero René Ravaud, who lost an arm in the British bombing raid. from Brest.

Little known to the public, it went unnoticed through the industry's biggest battles, including a trade war between its customers Airbus and Boeing and stormy transatlantic trade ties.

Safran's president pointedly reminded an audience that included French Finance Minister Bruno Lemaire and senior Boeing executives of Boeing's importance to CFM and the French aerospace sector at an anniversary ceremony in early June.

Speaking in the gilded halls of France's former Naval Ministry, Ross McInnes said: “We have steadfastly supported Airbus and Boeing through their respective ups and downs and, indeed, through the ups and downs of transatlantic relations. The success story would not have been possible in any other way.”

Senior Airbus officials did not attend the event which coincided with management talks at the Berlin Air Show.

On Tuesday, with Airbus shares falling 11% on production delays and a surprise load on its space business, another executive summit was being held at its Toulouse headquarters in a somber atmosphere, insiders said.

CFM must agree engine volumes about 18 months in advance, so mid-2024 loomed as a pressing deadline to clear the year 2025.

On Monday, Airbus CEO Guillaume Faury acknowledged that the year 2025 was not set in stone, but sought to limit concerns about the increase.

“As far as 2025 volumes are concerned, we have what we need in terms of commitment from engine manufacturers,” he told analysts.

“It doesn't mean we are in complete agreement on the final volumes we will retain, but we have what we need to be supported for its increase in '25. That's what matters to me.”