Safran’s Second Quarter LEAP Engine Deliveries Decline Due to HPT Yield Issues

French aerospace manufacturer Safran reported a significant drop in LEAP engine deliveries in the second quarter and first half of 2024, attributing the decrease to issues with high-pressure turbine (HPT) blade yields from its suppliers. This shortfall has impacted commitments to major airframe customers, Boeing and Airbus.

CFM International, a joint venture between GE Aerospace and Safran Aircraft Engines, delivered 664 LEAP engines in the first half of 2024, a decline from 785 units in the same period last year. The second quarter saw a particularly steep drop, with deliveries falling by 29.1% to 297 units. Safran's CEO, Olivier Andries, noted that the lower yield of HPT blades supplied to GE in April and May was a primary factor in this reduction. Although yields have slightly recovered, they have not yet returned to normal levels.

Howmet Aerospace, the primary supplier of HPT blades, has ramped up production by 40% in recent months and claims to be operating at or above capacity with current yields. Despite this, Safran has revised its full-year LEAP delivery guidance to flat to 5% growth over 2023, down from an earlier forecast of 10-15% in April and 20-25% at the start of the year. This revision is largely due to reduced deliveries of LEAP-1B engines to Boeing, stemming from decreased 737 MAX production, and ongoing HPT yield issues affecting Airbus more severely.

Despite these challenges, Safran expects to increase LEAP engine deliveries in the second half of the year, with improved HPT yields and a focus on supporting Airbus. Safran is carefully managing the situation to serve both airframers and airliners effectively.

In the first half of 2024, Safran's revenue from its propulsion segment rose by 13.8% year-on-year to $6.46 billion, driven by a 29.9% increase in civil aftermarket revenues. This growth was primarily due to strong demand for CFM56 spare parts and LEAP service contracts. Additionally, deliveries of CFM56 engines increased by four units to 28, high thrust engines rose by eight units to 91, while M88 military engine deliveries fell to 14 units from 31 in the same period last year.

Safran's equipment and defense revenues also increased by 26% to $5.17 billion, driven by higher original equipment sales, including nacelles and landing gear sets for the A320, A330, and 787 programs. The strong civil aftermarket demand has prompted Safran to raise its revenue guidance for that segment to "upper mid-20s" growth, from around 20% previously.