Podcast: As Airbus Strains, Boeing Gains

Airbus will again miss its delivery target due to supplier quality problems as Boeing’s turnaround takes another step forward. Listen in as our editors break it all down.

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Joe Anselmo (00:06): Welcome to Aviation Week's Check 6 podcast. I'm Joe Anselmo, editorial director. A year ago we recorded a Check 6 with the title "Airbus Races, Boeing Staggers to the 2024 Finish Line." So as we enter December of 2025, where are the two companies? Joining me to break that all down are Jens Flottau, our executive editor for Commercial Aviation, Chief Safety Editor Sean Broderick, and Chief Business Editor Michael Bruno. Jens, let's start off with you because Airbus had some bad news to share today.

Jens Flottau (00:41): Yeah, indeed they did. They are staggering to the finish line. You can say that they had to revise their delivery targets obviously downwards for the year 2025. They were aiming at 820 and had to tell investors that that is unachievable now and they're now targeting 790, which is significantly less. Obviously it's more than in 2024, but obviously not the number they've aimed at. The latest reason for that is a production flaw that they've discovered. One of their structures suppliers, Sofitec Aero, a company based in Spain and Seville in Spain, has detected that in the milling process of fuselage panels, they made mistakes which led to the panels being either too thick or too thin and that affects a large number of aircraft actually, and also the delivery process throughout the rest of the year. I guess we can talk about the details a little later.

Joe Anselmo (01:47): So are deliveries stopped?

Jens Flottau (01:49): No, they're not stopped and so what's happening is they discovered this, it's 628 aircraft that are affected, 168 of which have already been delivered. So there are 460 which are either in final assembly or have already been finished waiting for engines possibly or are in early stages of production. Now the aircraft that could be delivered this year, obviously Airbus now has to negotiate with customers what to do with them. They're safe to fly, but they need to be repaired at some point, and as you can imagine, those negotiations are going to be more complicated than if the aircraft were perfectly fine to go. So that's taking longer and given the number of aircraft, it's now essentially impossible to meet the original delivery numbers.

Joe Anselmo (02:48): We were talking before we hit record, this will be the second year in a row that Airbus has missed its delivery targets and the third of the last four years, only in 2023. What's going on?

Jens Flottau (03:00): Suppliers, suppliers, suppliers. Sometimes it's cabin and it's engines. Now it's structures, again, I should say structures also has been an issue for some time with Spirit AeroSystems affecting the A220 line and the A350 line. So it varies by supplier. Sometimes it's worse, sometimes it's better, but there's always somebody who holds things up, it seems. The question that I'm asking myself now and I think that Airbus should ask itself more importantly, is how is it possible that these quality lapses, like this, remain undiscovered for such a long time. This is 600 aircraft, so which means it's not something that happened a week ago and then was discovered now, but it happened like months ago. We don't know the exact details of it, but that oversight does seem to be inefficient, at least in this case and probably in other cases too. So I think Airbus really has to take a hard look at its processes at how it deals with the suppliers again, and that's going to be a key task for Lars Wagner, the new CEO of commercial aircraft who's coming in at the beginning of January to take over from Christian Scherer.

Joe Anselmo (04:30): Well, speaking of everybody, Sean, in the middle of the US Thanksgiving holiday weekend on Friday, the day after Thanksgiving to be specific, news came out that EASA was grounding A320s until a software update was implemented. And at first it sounded really bad, but then it really didn't turn out to be that much of anything, was it?

Sean Broderick (04:52): Well, in terms of disruptions, no. Mercifully, the operators were able to touch more than 5,000 aircraft, about 6,000 affected, and almost 5,900 of them I guess have been updated with just the software rollback. It's actually a reversion to an earlier version of software. The software that was pulled off was enhanced flight envelope protection. Nice to have software, not necessarily need to have software. Part of Airbus's Safety—Jens would know this. The Safety Beyond Standard initiative is what Airbus calls it. They've been rolling it out for several years now, but the very brief backstory is there was an incident involving a JetBlue Airways A320 on October the 30th flying from Cancun to Newark. So think of over near the Gulf of Mexico there where there was an uncommanded loss of altitude in which the autopilot stayed on. Airplane lost—official reports have not, I haven't seen a confirmed report, but flying at about 35,000 feet went down about 18,000 feet.

(06:12): Long story short is Airbus linked a potential solar activity to solar flares and the results of the neutrons thrown off by solar flares apparently affected this airplane, which had the new software on it. They haven't explained clearly. They explained it to EASA because EASA turned an Airbus telex into that emergency AD within hours on the 28th of November. Airbus hasn't explained how it figured this out, but it had enough confidence to order everyone that had this newer software to roll it back to the older version. That was about 6,000 A320s. The operators spent most of Friday actually got started before the Airbus AD, before the EASA AD and then into Saturday and I guess Sunday into Monday doing the work, couple hours per airplane. Amazing that they were able to touch 6,000 airplanes in what, three or four days and not cause major disruption. Again, there are some operators that had significant disruption because of the size of the fleets or their capabilities or whatever, but in general, the really big airlines, American Airlines and some airlines weren't affected.

(07:33): United said it wasn't affected. EasyJet got its airplanes done, really an amazing turnaround. But like Jens said, the questions that I have that still that I haven't seen answers to is how did Airbus figure this out? Why was it just this airplane and this sort of combination of software and already existing hardware? It's an interesting case. We know that we're in a sort of a peak in the solar cycle that's every 11 years and we know that the farther an airplane is flying, the less protection it has in the atmosphere. So in theory it's certainly plausible, but it's interesting that they were able to figure this out so quick and they were so certain about it. So questions we're certainly going to be asking Airbus and the avionics experts about the plausibility of all this and the idea that the affected fleet has been identified and that everything is going to be fine going forward. So interesting. Airbus did some racing at the end of the year to get that done, but it appears to be behind them, at least in terms of the impact on those airplanes.

Joe Anselmo (08:42): And these software upgrades. They were able to get them implemented very quickly, weren't they?

Sean Broderick (08:46): Yeah, it's data loader that's basically, I guess loading the old software back on. It scares me as somebody who does not know much about computers and engineering to think that you can just overwrite old software with new software and everything's going to be just fine. I don't think I could ever do that with the computer I'm using here and have everything be great, but apparently the way they design these systems, there is some thought put into it that every once in a while we might have to take a step back and we got to be prepared to do that, and that's what's happened in this case.

Joe Anselmo (09:16): Michael Bruno, welcome. I noted at the beginning that a year ago we said Boeing was staggering to the finish line. They've just come out of a strong Dubai Air Show order wise and their stock went up 10% after their CFO came out with some news.

Michael Bruno (09:32): So if you happen to be a Boeing investor who got in right around Thanksgiving dinner or the day after, came in this week, you had a very good start to December. The new CFO Chief Financial Officer Jay Malave showed up at an investor conference recently and he said all the right things that Wall Street wanted to hear. What did he say? He said, let's go to the low numbers first and build up to the big numbers. He said, there's only going to be a $2 billion cash burn for all of 2025. This is better than what the company had been predicting before. People were expecting at least $2.5 billion recently. Earlier in the year, people thought maybe twice as much, $5 billion. So they worked it all the way down from the mid single digits to just one or $2 billion loss, still losing money, but it's on the right trajectory.

(10:28): Even better than that, Mr. Malave said that next year they're going to make $2 billion or so in positive free cash flow, and this is a key milestone for Boeing, which has been losing money and reporting red ink year after year after year, ever since the MAX crisis and the COVID-19 crisis. Now they're going to start supposedly generating cash, which does a lot of things. It helps them burn down debt, it helps them make more research and development investments, takes care of some other odds and ends, basically makes them a real sustainable business again. And Mr. Malave said next year it'll be low single digit billions, but it'll grow every year thereafter. Better yet, Mr. Malave said that he is now embracing this longstanding goal that Boeing management has been putting out there for years. Going back to the last CEO before Kelly Ortberg, the current CEO, but Dave Calhoun before he left the job, put out this big marker that said Boeing's going to get back to producing $10 billion a year in free cash flow.

(11:37): And that also is a big milestone. If you want to be a shareholder that gets returns, that gets rewarded for investing in the company, that's the kind of milestone that you need to hear because it means they're going to start paying you back as well as paying debt as well as paying for new aircraft. So Malave came out and said all kinds of great things. He also reiterated that the company is going to be delivering more commercial air transports next year, 737s are going to go up, 787s are going up, and he was rightfully cautious on the other things. He said, rates are going to increase—monthly production rates of the 737 for instance, are going to increase only when the supply chain proves that it's stabilized. This is not new news. This is exactly toeing the line and repeating the message that's been repeated by Mr.

(12:28): Ortberg ever since he took the job. Last but not least, Mr. Malave kind of threw cold water or more cold water on any kind of delusions and fantasies that Boeing may be announcing a new aircraft in the near future. He said, that's a ways off. It doesn't mean we don't go invest in technology, but they're a ways away from doing that. And if you are a shareholder or an investor, that's actually good news because it means the company is continuing to focus on more immediate priorities, including getting the day-to-day business back up and running. So put all that together. Wall Street said we love it. They shot the stock price up 10%. Everybody was green for the day.

Joe Anselmo (13:10): Jens, you heard what Michael just said, Boeing has really turned the corner. Are they catching back up to Airbus or do they still have ways to go?

Jens Flottau (13:17): Well, both is true kind of, right. I mean, everything Michael said is true. There are challenges remaining—777X delayed by another year, probably 777-10, not certified on the rates themselves. It's actually closer than people think. If you look back into the Airbus numbers for this year through October, the average rate of A320 Neo deliveries was 45, which is just a little over the level that they had during COVID and Sean. The MAX level is around that number too. So on average, at least—

Sean Broderick (14:02): Close, yeah.

Jens Flottau (14:03): So they're not far apart there. And then if you look at widebodies, 787 moving up to, what is it, 14, something like that in the next few years, A350 going to 12, but A350, if you look at A350, the average rate again in the first 10 months of this year was four aircraft. So you can see how much Airbus is struggling and how far away they are from meeting their really, really ambitious targets. A220, the same thing. They were going to go to 14 next year. They're going to 12 by the end of the year. So it's all not that great. And yes, Boeing's catching up slowly, planning to move up rates every six months on the MAX, so it's more even. Boeing's at least not losing market share anymore. But of course there is still a big gap in the market share that remains, and that may open up again depending on where rates go.

Joe Anselmo (15:04): You mean Airbus has a lot more orders than Boeing?

Jens Flottau (15:06): Backlog? Of course. Yeah. Backlog is much bigger on the Airbus side in narrowbodies, that is not the case in widebodies. Widebodies is a bit of a different story.

Michael Bruno (15:16): I just want to follow up on what Jens is saying and kind of give another analogy. So Boeing got knocked to the ground in recent years and they're picking themselves up and that's great, but there's still a difference between that and getting to a running jogging pace that Airbus is at already. And in fact, as Boeing tries to catch up and become more on par with Airbus, they're going to run into many of the same issues. And Mr. Malave actually kind of pointed to this when he spoke at the UBS Global Industrials conference, he said right now, for instance in the 737, they're working to get to rate 42—production rate of 42 new 737s built every month, not there yet, trying to get there on a consistent month by month basis. And Mr. Malave says they're going to do that by the end of the first quarter of 2026.

(16:08): That's March. Then he already went ahead and he started telling people, don't hold your breath about getting to the next rate break, which is about 47, 47 new 737s a month. He said, the higher we go in rate, the harder it's going to be. And for the longest time we've been hearing it's going to be six months increments between rate breaks. But already Boeing management is kind of starting to curb the enthusiasm because as they get higher in rates, they are pushing and pulling on that same supply chain that Jens talked about in the beginning with Airbus, it's still Spirit AeroSystems that produces aero structures. There's only a handful of interior cabin parts producers. There's only two major engine OEMs. The whole industry comes down to the same suppliers and these same suppliers, while they're better off, while they're more reliable than they have been in recent years, especially coming out of the pandemic, they have still limited capacity and there's still issues that are restraining overall growth of the industry going forward. So yeah, Boeing's definitely picked itself up, but as it tries to pick up pace and catch up to Airbus, it may have some natural challenges that mean this isn't going to necessarily happen by the end of 2026.

Sean Broderick (17:27): To be fair, Boeing has said consistently it's going to be at least six months between those rate breaks. Kelly Ortberg has said that from the beginning to do exactly what you just said, Michael, to sort of temper expectations to say that it's going to be every six months, they're going to be clicking up five aircraft and the supply chain issue too. Boeing has built up a lot of buffer because of the issues they've had over the last several years. And Kelly and the other executives have said that as we get beyond 42, closer to 47, the pressure on the supply chain becomes—not only does Boeing have to load and then output the number of aircraft that they're targeting, 42 or 47, but the supply chain actually has to ship in at that rate. And that's something that hasn't been the case for the last several years because rates have been fluctuating and basically been going down, and Boeing has held the suppliers' shipments in at higher rates than they're actually producing at in many cases. So it's going to be interesting to see in all ways how quickly, like Michael said, how quickly Boeing's jogging pace will pick up here to a steady run that Airbus has been at for a while.

Joe Anselmo (18:40): Yeah. Let's go full circle as we close out. I mean, how could this issue that you talked about have happened at Airbus? Who fell down on the job? Did Airbus fall down on its oversight, or is this just a sign of the times we live in where suppliers just can't meet demand?

Jens Flottau (18:59): Frankly, it's really hard for me to judge this in greater detail here. I frankly just don't know enough about the case. I just look at this bigger picture and I'm thinking, we've been briefed for years about all these initiatives, how they're getting the supply chain back under control, and this is like four or five years ago where all these, the watchtower and whatever they name it has been installed and reestablished and how they're sending all these teams into all their suppliers to supervise what's going on. And yet again, it's happened and it hasn't been discovered. The mistakes that have been made haven't been discovered for some time. So I just wonder what's wrong? There must be something that they need to address.

Michael Bruno (19:56): It's an industry-wide problem. I mean, let's remember Pratt & Whitney had the powdered metal issue with the geared turbofan. Spirit AeroSystems had problems putting panels together on aircraft or tail sections. Sean's forgotten more about this than I can remember at the moment, but it's an age old—this is classic program management and getting rid of quality escapes, and this continues to haunt the industry and probably will as we go forward, as both major OEMs—all the OEMs try to raise the rates.

Jens Flottau (20:31): I'm just going to point to Lars Wagner again. He's the guy who's an aerospace engineer, has an Airbus past in Airbus program management, is very, very highly regarded. Went into engines, became CEO of MTU Aero Engines. Now returning to Airbus to run the commercial aircraft business. It just feels to me that he's exactly the right guy they need now to fix this. It's not about orders and Airbus as we have known for a long time. It's about fixing the production system, fixing the supplier relations and getting the rate increases done that they've been promising the market for years.

Joe Anselmo (21:12): Well, guys, thank you for a very informative discussion today. It'd be interesting if we come back in a year to see where we are, so let's make a date to do that. But for now, that is a wrap for this week's Check 6 podcast. Thanks to Jens, Sean, and Michael for their time, and also to our podcast editor in London, Guy Ferneyhough. If you want to listen to more about Airbus, check out this week's MRO podcast episode on the A380 engines. You can find and follow Aviation Week's MRO podcast wherever you're listening to Check 6. And if you found today's discussion helpful, please consider leaving us a star rating or writing a review. Better yet, share this episode with a friend or a colleague. Thank you for your time and have a great week.