Decline in LEAP Engine Deliveries Amid Boeing and Airbus Hurdles
Safran, through its joint venture CFM International with GE Aerospace, reported a decrease in LEAP engine deliveries during the third quarter of 2024. A total of 365 LEAP engines were delivered, down 24 units from the previous year. The primary causes of the decline were lower deliveries of the LEAP-1B engines to Boeing, affected by Boeing’s production struggles, and difficulties with high-pressure turbine (HPT) blade yields impacting the Airbus variant of the LEAP-1A engine. Although deliveries fell year-on-year, Safran did report a sequential growth of 68 units from the second quarter, driven by improvements in HPT blade yields.
Boeing Production Cuts Lead to Surplus LEAP-1B Engines
The reduced production of Boeing’s 737 Max, caused by systemic production issues, a federal limit, and ongoing labor strikes, has left Boeing with an oversupply of LEAP-1B engines. Safran estimates that Boeing’s inventory surplus is in the “three-digit” range, though the company refrained from providing more specific figures. These production challenges at Boeing have directly affected the timely delivery of engines, creating a backlog that Safran is now working to manage.
HPT Blade Yield Improvements and Future Certifications
A key component of Safran’s efforts to address production challenges is the ongoing work with its HPT blade technology. The LEAP-1A HPT blade, expected to receive certification in the coming weeks, will serve the maintenance, repair, and overhaul (MRO) market initially. Safran has also made progress on the LEAP-1B HPT blade, which is scheduled for certification by the end of 2025. These improvements are essential for stabilizing the supply of LEAP engines and meeting the growing demand from both Boeing and Airbus.
Production Adjustments and Inventory Management at Airbus
Safran has also made adjustments to its production lines in response to the engine manufacturing constraints. The company noted a buildup of low-pressure modules due to the production limitations of the LEAP engines. To avoid excessive inventory, Safran is managing its stock carefully while preparing for anticipated production ramp-ups at both Airbus and Boeing. This strategy aims to ensure that Safran will be able to meet future delivery targets while preventing shortages or overstocking issues.
Positive Performance in Landing Gear and Nacelle Deliveries
While engine deliveries were challenged, Safran saw positive results in other sectors of its aerospace business. Landing gear deliveries for the A320 were 142 units, down by 11 compared to the previous year. The A350 landing gear remained flat at 11 units, though it is below expectations. In contrast, nacelle deliveries for the A320neo rose by 25%, totaling 159 units. The 787 landing gear delivery saw an impressive increase, more than doubling to 14 units, unaffected by the challenges Boeing faced with its 737 Max production.
Financial Growth from Aftermarket Services
Despite setbacks in engine deliveries, Safran posted strong financial results for the quarter, boosted by robust demand in its civil aftermarket services. The company reported a 14% increase in revenues, reaching €6.6 billion ($7.1 billion). A significant contributor to this growth was the 20% rise in propulsion aftermarket services, which included an uptick in demand for engine maintenance and repairs.
Outlook and Supply Chain Management
Safran is cautiously optimistic about resolving its supply chain challenges, with expectations that the Boeing labor strike will conclude in the coming weeks. However, the company has indicated that full normalization of the supply chain will not occur until after 2025. Safran is closely monitoring 20 critical suppliers to ensure continued stability and to meet future demand, especially as it prepares for future production ramp-ups.
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