By Bjorn Fehrm
April 27, 2017, ©. Leeham Co: Airbus Group presented its first quarter results this morning. There were no surprises. Revenue and earnings were a bit lower than expected, but this is because a part of the company has been sold, the Defense & Space Electronics division.
There was no news on the problematic A400M. Negotiations with the customers have just begun, any results will take time to materialize.
The Airbus (the group is now called simply Airbus) revenue and adjusted EBIT (before Mergers & Acquisitions) were as expected, €13bn (€12.2bn 1Q2016) and €240m (€500m). Reported EBIT was €900m, boosted by the sale of the Electronics division.
The commercial aircraft division is the motor of the group with 75% of revenue and 117% of adjusted EBIT. Helicopters had sales which has picked up, but results are affected by lower use of the helicopters that have been sold. Defense (ex A400M) is doing ok in a non-expanding market.
Guidance for 2017 is kept.
Sales have been slow at net six aircraft, but deliveries are higher than last year at 136 aircraft compared to 126 1Q 2016.
Airbus plans to deliver around 200 A320neos during 2017. Key to achieving the target will be engine deliveries, especially from Pratt & Whitney. The Pratt & Whitney engine issues are worked upon. There will be more testing during the year to make sure the fixes also work. Airbus has flexibility to substitute ceo models instead of neo. This has already started with JetBlue extending its stream of A321ceos instead of taking neo models. Rate 60 in 2019 is in plan.
The first flight of the A330neo has moved from end of the second quarter to after the summer. Delivery is set for first half 2018. Airbus is not worried it can fill the still open 2019 slots. The A330neo has good margins and there is pricing flexibility if needed. The present rate six is comfortable. It would be easy to land at rate seven, should it be needed, as the slowing down to rate six is still ongoing.
Sub-supplier deliveries (read: cabin items) are picking up, 13 (6) aircraft were delivered during 1Q. There are still quality issues on toilets and seats but these are now handled in the field. Rate 10 at end of 2018 is in plan.
The lowering of the production rate to wait out the market is progressing to plan. Cabin densification projects has eased the pressure for new engines for now.
The market is still weak and the Super Puma grounding for the North Sea is still not resolved (grounding in 2Q 2016). Deliveries were up at 78 units (56) as was revenue €1.29bn (€1.16bn) but EBIT was down at -€2m (€33m).
Revenue down at € 2.1bn (€2.5bn) as the Electronics division was sold (revenue about €0.5bn). Adjusted EBIT (ex spin off) was down at €63m (€107m).
A total of 4 A400M were delivered during 1Q. Airbus has entered in negotiations with the six Nations customer organization OCCAR. It’s too early to say what will be the result of these negotiations. Any adjustments to provisions will have to wait until the negotiations are finished.