By Bjorn Fehrm
Munich 27 Feb. 2015: The team from Airbus Group that met the press in Munich today consisted of Tom Enders, Airbus Group Chief Executive Officer, Harald Wilhelm, Airbus Group Chief Financial Officer and Marwan Lahoud, Head of Airbus Group strategy and M&A.
It was a team in good spirits that met around 150 on-site journalists from mainly Europe, with both Tom Enders and Harald Wilhelm clearly at ease with the groups improving results and giving Marwan Lahoud compliments for his restructuring work in the groups remaining problem areas.
Before we go into the areas with work in progress, lets focus on why these gentlemen felt at ease with presenting the state of Airbus Group after its first year operating under the new name.
- Commercial airplanes is the undisputed motor of the group generating 70% of the 2014 turnover and 66% of the profits.
- This division has its large challenges behind it with A350 delivered to first customer, A320neo flying and A380 on the way to break even during 2015.
- The revenue and profit engine of this division, A320, is seeing continued very strong orders year after year and Airbus must now ramp production to 50 per month by Q1 2017 and as that does not bring down the backlog it is studying rates over 60 per month.
- The A320 program is so successful that Airbus has agreed a lower royalty payback to UK government after they had been paid back in full of launch loan with a nice interest. It was reasonable for both “that we now pay an adapted royalty” said Wilhelm.
- Key enabler for increases in A320 production is the supply chain. Wilhelm commented that for most of these companies the investment in A320 production tooling is paid off and a rate increase is pure cash in hand. He therefore foresee no problems getting the suppliers on the bandwagon for even higher rates.
- A350 production ramp is a challenge but there were no further warnings of provisions for ramp up costs, on top of the one announced last year.
- A380 will finally be cash positive on a per unit basis during 2015, “definitely not on a program basis” said Tom Enders. “That would be in our dreams but we are humble people, not dreamers” said Enders. He continued to say that A380neo will happen “if it is a good business case”, we will however continue to improve A380 regardless, as we do with all programs.
- A330ceo is having problems filling the gap to A330neo. After announcing rate cuts to 9 at the Investor conference in December, now only two months later followed a cut to 6 per month. Clearly the A330neo move was badly needed and Airbus has low confidence in China picking up on A330R.
- The helicopter business, normally a strong part for Airbus, is being hit by present hold on activities and investments in the Oil and Gas industry.
- A clear positive according to Enders is that the Super Puma problems are solved and that new orders had started to flow for the type and the division has kept revenue and profits despite a weak market.
- Airbus will present a new helicopter type, X4, at next weeks HAI Helicopter Expo in Orlando Florida.
Defence and Space
- The highlight is here space which has many positive developments with orders and deliveries for satellites being healthy and positive developments on the launchers side.
- Airbus and Safran Group has formed a Joint Venture, Airbus Safran Launchers, which will continue the production of Ariane 5 and develop Ariane 6 launchers. Military launchers will also be part of the JV. Airbus expects a € 800 million contribution from Safran during 2015 for their proportionally larger part in forming the 50/50 JV.
Problem areas with still work in progress
- The problem area of the group is Defense. Enders et al are probably happy that the BAE merger did not happen as this would have increased the groups reliance on troublesome state budgets for its defense business.
- After at least 10 years of trying, the Eurofighter consortium has finally got a contract for an AESA radar upgrade of the Typhoon. This is at least 5 years to late and will now not materially change the meager sales of this fighter hot rod with weak radar and limited all round capability.
- There are still no signs of getting a Europe to agree on a sensible UAV program let alone any 5th generation follow up to Eurofighter according to Enders.
- The A400M program is suffering the sicknesses of A380 and Boeing 787. Traveled work is a plenty at the Sevilla FAL especially from the Bremen fuselage Pre-FAL. There is substantial development and testing work still to be done and the industrial ramp up is problematic.
- Airbus is putting its best people on the problems with civil airliners test chief Fernando Alonso taking the rudder of the program and Airbus head of Operations Pilar Albiac-Murillo taking over the industrial side.
- Marwan Lahoud said there are over 100 investors knocking on Airbus doors to snap up the area of defense that will no longer be retained under the motto “we will get out of all activities where we can not be a dominant player in the market”.
- One can therefore expect further disvestments and restructuring moves in the defense area during 2015 declared Lahoud and Enders.
- Adding to that, the remaining shares in Dassault shall be sold during 2015 “dependent on market conditions” according to Lahoud.
- Overall Airbus Group forecast steady increases in all business KPI’s; revenue, profit, free cash flow, earnings per share and investor dividend.