Higher fares, fewer available seats possible as Airbus cuts production expectations

Airbus on Monday cut its target for how many planes it expects to make this year and next, citing supply chain issues.

Airbus on Monday cut its target for how many planes it expects to make this year and next, citing supply chain issues. (Protasov AN, Shutterstock)


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NEW YORK — Airbus cut its target for how many planes it expects to make this year and next, citing supply chain issues. It's the latest bad news for airlines and passengers as jet supply continues to get squeezed.

The tighter-than-expected supply of jets is forcing airlines to adjust their expansion plans, even as they deal with record demand for air travel. That means that passengers could find fewer available seats and fares that are higher than they would be otherwise.

Airbus has not faced the problems of its primary rival Boeing, which has had production cut back by regulators as it struggles to fix safety and quality issues. Boeing's problems have piled up after 737 Max Alaska Air flight in January lost a door plug, leaving a gaping hole in the side of the plane. But airlines that use Airbus planes have not been without problems, as a number of A320neo jets have been grounded due to problems with their engines.

Late Monday, Airbus announced it now expects to deliver about 770 jets this year, down from its previous target of about 800. And it said while it still has the goal of building 75 of the A320 family of jets a month, it is pushing the target back to 2027, from its previous goal of 2026.

"Airbus is facing persistent specific supply chain issues mainly in engines, aerostructures and cabin equipment," the company said Monday evening.

The news sent shares of Airbus down 12% in trading in Paris Tuesday. Shares of Airbus are now down 6% year-to-date, after being up as much as 24% for the year in March on Boeing's problems.

Airlines are seeing very strong demand for air travel. The TSA reported it screened 2.99 million passengers at U.S. airports on Sunday, a one-day record for the agency, and it expects those screened over the week surrounding the July 4 holiday to be up 5% from a year ago.

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High demand and limited supply tend to be a prescription for higher prices. Airfares soared 30% in 2022 compared to a year earlier, according to the Consumer Price Index, the government's key inflation measure, as airlines struggled with staffing shortages that limited their ability to provide the flights needed for the post-pandemic rebound in demand for air travel.

Airfares were down 13% to nearly 19% from those 2022 peaks during the summer travel months last year, as the number of available seats on planes rose by about 15% from a year earlier.

And fares have continued to be lower this year, but at a far more modest 6% drop on average in the months so far this year, as airlines cut back expansion plans due to the aforementioned aircraft delivery issues. There will likely be upward pressure on fares if the number of jet deliveries from the two major manufacturers remains constrained and demand for travel stays strong.

Passengers could also find fuller planes this summer. U.S. airlines filled 86.9% of available seats on planes with paying passengers during the June through August travel season last year, when adjusted for miles traveled, according to data from the Bureau of Transportation Statistics. And while that load factor was down, as is normal in the first three months of this year, planes were nearly 1% fuller than during the first three months of 2023.

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Chris Isidore

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