Airbus Group (before EADS) reported 1H 2014 results yesterday against the backdrop of an eye-catching cancellation (Skymark A380). Overall it was a report which showed solid progress in making the former EADS a homogenous, modern industrial group managed by market realities and not involved government’s politics.
Much has been achieved since the same occasion last year when then EADS announced the name change to Airbus Group and the merging of its Defense and Space side into one tighter knit division. These changes reflected market realities; civil aerospace is growing year over year whereas Defense budgets are shrinking. The yesterday announced group numbers shows gains in revenue and profitability (+6% each when EBIT is cleaned from sale of ex. Paris HQ) underlining solid progress in the undertaken structural changes.
The all dominant civil airliner side (71% of group revenue, 72% of EBIT) is now a group locomotive with less challenges than a year ago. Today the A380 program remains a cause for concern with the forced cancellation by Airbus of its Skymark A380 contract as the airline could not arrange the financing of the airplanes. Airbus cancelled the order before two already built airframes had started cabin installations, thereby making them easier to sell to e.g. existing A380 customers.
The difficulties of the customers to make the business case work for the A380 is of course no good news (others have reduced their orders) but this is the only blip of a civil division that a year ago had more on its plate;
Airbus group CEO Tom Enders might still see the A380 program causing concern but he’s attention is most likely at the groups larger problems. Its defense side is seeing a flat market at best and its largest program, the Typhoon fighter, is in dire straits. It has no existing customer signaling they want to extend their orders, on the contrary, any discussion it to cut further. The prospect of new sales, despite many sales campaigns is also bleak; the capable air defense fighter is just that, not a multi-role system with good economics demanded by today’s markets. Any development of the Typhoon to more multi-role is slow in coming, its complex customer structure has still not agreed on ordering the basis for such a transformation, a series implementation of an electronically scanned radar.
Overall Airbus Group is working its problems with the rationale of a capable and well-managed giant. This is perhaps the most striking difference to the recent past, a then amalgamation of national companies loosely merged into EADS and Airbus, managed by the different governments political agendas. The market agrees with our view that Airbus Group is stronger today then EADS ever was, it traded 3% better after the report yesterday.