Engine manufacturer Safran is not yet convinced of Airbus’ production plan


The Safran logo is pictured in the company’s logistics area in Colomiers, near Toulouse, France on November 15, 2019. REUTERS / Regis Duvignau

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PARIS, Oct.29 (Reuters) – French engine manufacturer Safran (SAF.PA) on Friday expressed further concerns over Airbus proposals to nearly double jets production, as a struggling aerospace industry remains divided on how to share an emerging recovery supporting shares of both companies.

The world’s third-largest aerospace entrepreneur, which co-produces Airbus (AIR.PA) and Boeing (BN) engines with General Electric (GE.N), remained cautious despite assurances from Airbus on Thursday on the pace of request once the pandemic is over.

The European aircraft manufacturer plans to increase production to 65 A320 Family jets per month by 2023, up from 40 per month recently and is considering rates of up to 75 per month, sparking fears of overproduction on the part of engine manufacturers and leasing companies. Read more

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Safran chief executive Olivier Andries, speaking on the release of the company’s quarterly results, said he saw little difficulty in producing enough engines to meet Airbus’ firm target of 65 per month , not far from pre-crisis rates of 60.

But he signaled that little progress had been made in agreeing to increases beyond that, with Airbus and major suppliers holding firm in quarterly earnings calls this week.

“On exploring for rates above 65, this is obviously a challenge, and for us the question remains the same – whether such rates can be sustained over the medium term. It is still an open question,” said Andries to reporters.

“Of course, we have seen production increases in the past before, before the crisis. But the supply chain was considerably weakened during the crisis.”

German engine manufacturer MTU Aero Engines, which supplies parts for the GE-Safran consortium’s main rival, Pratt & Whitney (RTX.N), was more supportive of Airbus’ plans.

Andries noted that suppliers were experiencing global labor shortages, a recurring theme in the latest global results.

Despite this, Safran raised its full-year cash flow target and reaffirmed other targets with quarterly revenue up 10.4%. Its shares rose more than 3%.

Third-quarter revenue of 3.734 billion euros ($ 4.4 billion) is also up 5.7% from the second quarter of this year, after heavy summer traffic in Europe and the States -United.

The partial recovery of the pandemic has boosted sales of spare parts for older engines as well as parts for other equipment like brakes and cabs.

Engine manufacturers and rental companies earn most of their money over the life of an aircraft, while planners get paid for new jets.

Safran’s revenue in the civil aftermarket increased 43.8% in dollars in the third quarter compared to the same period last year, and 24% compared to the second quarter of this year.

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Reporting by Tim Hepher; Editing by Sudip Kar-Gupta and Jane Merriman

Our standards: Thomson Reuters Trust Principles.

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