Zodiac Aerospace seat crisis leads to troubling financial results

Zodiac Aerospace will inaugurate a new facility ‘Zodiac Aerospace Services Middle East’ on November 9, 2015 during the Dubai Airshow - image courtesy of Zodiac Aerospace.
Zodiac Aerospace inaugurated a new facility ‘Zodiac Aerospace Services Middle East’ on November 9, 2015 during the Dubai Airshow - image courtesy of Zodiac Aerospace.

Zodiac Aerospace presented its worst ever annual financial results for the 2014/2015 fiscal year, facing an operating income shortfall of 44.6% as a result of production delays at its aircraft seat division.

The French component supplier announced their lower current operating income of €314.1 million compared with €567.3 million in 2013/2014.

Zodiac Aerospace shares dropped nearly 10 percent after the 44.6 percent decrease in core annual earnings was announced, according to a report from The Economic Times.

“These figures don’t please us; it is a fiscal year that doesn’t satisfy us,” said Zodiac Aerospace CEO, Olivier Zarrouati.

In the company’s official statement they announced that, as of November 23rd, the backlog of delays was 500 packs, which equates to roughly 1,500 seats. This is a significant improvement on the September figure of 1,700 packs.

Despite progress from Zodiac Aerospace in the wake of the seating crisis, action was taken by a number of customers. American Airlines took legal action against Zodiac Aerospace and subsequently cancelled part of their contract with the company. Along with this, Airbus CEO Fabrice Bregier has been openly critical of the seating crisis, calling it “unacceptable”.

The company remains optimistic and  have implemented a new organisation and launched a transformation plan, known as Focus, to learn from the seats crisis and strengthen industrial operations. The Focus transformation plan aims to reorganise the production process and will last for at least 18 months, according to reports.

The company also recently opened a new facility in the Middle East.

Zodiac Aerospace predicts an operational margin of 10% for the next fiscal year and 12% for the one after. This is expected to be made possible by the comprehensive Focus initiative resulting in reorganising management, addressing a lack of engineers and improving supply chain weaknesses.

“The recovery initiated in 2014/2015 will continue in order to restore our industrial performances towards our customers and improve our financial performances,” said Zarrouati.

Unrelated to the seating crisis, in June this year, the company also experienced a disruptive explosion at its Aerospace Composite and Engineered Materials facility in Washington, which injured five workers.