Shares of Airbus (FR:AIR) (EADSY) are rallying today on the French exchange after jet engine maker CFM agreed to redirect some engines to Airbus in order to help the planemaker meet its ambitious target of delivering around 770 aircraft in 2024. According to Reuters, this temporary move involves reallocating engines initially destined for the aftermarket. The decision highlights the ongoing struggle between planemakers and repair shops over the limited supply of engines, especially as demand continues to grow.
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While this agreement eases tensions between Airbus and CFM, it is likely to frustrate the airlines that are seeing long wait times for engine repairs. It also does not help that newer engines come with higher-than-expected wear and tear. This is because they tend to run hotter, which, as a result, require even more maintenance
These overall supply chain issues have caused Airbus to lower its delivery target earlier this year from 800 to 770 aircraft. Nevertheless, CEO Guillaume Faury recently expressed some cautious optimism about engine supplies. Still, some analysts remain skeptical that Airbus can hit its delivery goals but noted that the firm can deliver as little as 750 aircraft without having to change its guidance.
Struggling to Capitalize on Boeing’s Weakness
Given the recent struggles that competing aircraft manufacturer Boeing (BA) has been facing, it must be extremely frustrating for all Airbus stakeholders to not be able to fully capitalize on Boeing’s weakness. Indeed, Boeing’s customers are growing increasingly annoyed by its production issues. But with Airbus physically constrained due to supply shortages, it is unable to pick up the slack.
This has actually led to desperate cries from companies like United Airlines (UAL), who has asked for someone to step in and break up the Boeing and Airbus duopoly.
Is Airbus a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on Airbus stock based on nine Buys, three Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 9% rally in its share price over the past year, the average Airbus price target of €160.19 per share implies 10.35% upside potential.
