By Bjorn Fehrm
July 27, 2017, ©. Leeham Co: Airbus Group presented its 2Q2017 results this morning. The result for the first half and the full year of 2017 is decided by A320neo engine deliveries.
Out of a planned 200 A320neo deliveries for the year, Airbus could deliver 54 aircraft during the first half, with 35 completed aircraft waiting for engines on the Airbus tarmac.
The Airbus revenue and profit for 1H2017 was down to €28.7bn (€28.8bn) and €1.1bn (€1.7bn), partly because of divestment of Defense electronics in the period.
Commercial aircraft dominates the group with 75% of revenue, at €21.8bn. The helicopters business has made progress with sales picking up and a lifted ban on Super-Puma (H225) flying from Norway and UK. Revenue was €2.6bn.
Defense is business as usual at revenue of € 4.6bn, except for the group’s problem child A400M. Harald Wilhelm, the group CFO, cautioned that needed write-offs could be as large for 2017 and 2018 as for 2016 (€1bn). It all depends on the ongoing negotiations with the A400M customer group.
Group guidance for 2017 was reissued but with a clear caution that it will depend on A320neo engine deliveries catching up.
Airbus planned to deliver 200 A320neo during 2017. This is still the target after a first half with only 54 deliveries. The problem is Pratt & Whitney (PW) cannot deliver engines to Airbus at the same time as it changes engines with issues in the field.
The Pratt & Whitney engine issues are under intense rework. Airbus said they will judge the GTF readiness for service by the airlines’ experience rather than PW’s assurances.
The successful delivery of 200 A320neo for 2017 will depend on PW’s delivery capability.
CFM’s LEAP engine deliveries are on plan and the engines experience a normal level of teething problems in service.
The engines for the A330neo are now in Toulouse, with first flight scheduled after summer holidays in September. A330ceo deliveries are running to plan at six per month.
The deliveries are running well with a fast reduction in traveled work. The hiccup in the quarter was the outright cancellation of four produced Qatar Airways A350-900.
Talks are ongoing with Qatar regarding the fate of the aircraft. Solutions could be revised pricing and subsequent delivery, or rescheduling (and reequipping) of the aircraft for another customer.
The four finished aircraft stays in inventory and are therefore missed in cash flow, revenue and profit for the quarter.
Flight tests of A350-1000 is progressing well. First delivery is end of year as planned .
Airbus will lower the production rate from 12 aircraft per year to eight by 2019. The lower production rate “will not materially affect Airbus results” according to Wilhelm. Intense work is ongoing to reduce the fixed costs of A380 production.
Eight (six) A400M were delivered during 1H2017. Airbus says the negotiations with the six Nations customer organization OCCAR are held in a constructive atmosphere. No negotiation results were revealed. Further write-offs will depend on negotiation results.
Having 40-50 A320’s sitting on the tarmac waiting for engines must wreak havoc with Airbus’ cashflow – I wonder how this pain is being shared between Airbus, UTC and the customer.
Why don’t they stop producing 320NEO’s for the P&W engine customers until the backlog reach say 10 aircraft?
Because Airbus needs to build something at that production slot, and just because CFM is experiencing less issues doesn’t mean they are ready to just supply a ton of additional LEAPs (or CFM56s, or IAE and the V2500) in short notice.
Good point, CFM also needs to build LeapB’s and CFM’s for X outstanding CEO and -800/900 orders.
Hopefully some good news in the pipeline, see link.
Resolve ? Its just corporate PR for saying they have had some meetings and said lets do this . Execution , not so much
Most likely can CFMI double output of the LEAP 1-A within a few months. Lots of preparations were made for the ramp up. It will send a clear message to PWA if Airbus stops building the PWA powered A320neo version until the backlog is in single digits.
Maybe, but that doubled output is probably already factored into the PW vs CFM A320neo production ramp up plan. CFM would need to produce MORE LEAPs than they initially factored in order to cover for PW. There was always the expectation that CFM would only be building ~60 -1As a month (for 30 A320neos + any spares), give or take a few planes, with PW taking on the other 30 A320neos built that month.
CFM also has to deal with ramping up the -1B, and if push comes to shove they will likely make sure they get -1Bs out on schedule versus supplying more engines to Airbus as they are the sole engine provider for the Max (CFM can share Airbus’s wrath over late planes with PW, with Boeing they would be the sole target).
There are bottle necks looming on the engine supply front?
Wonder on which of the -1A’s or B’s are they making the biggest profit?
Does anyone know what Airbus commercial (civilian-A32X, A350, etc.) aviation profit margins are?
It would seem if the US Gov can get BA to “eat” $3B (pretax) on the troubled KC46, program, OCCAR could successfully press for $1B “plus” from. AB on the A400. By the way, does it still need serious rework to meet its customer specs? Didn’t the lady German Defense minister have to abandon riding in a busted one a few months back on a relatively short trip from Germany to one of the Baltic republics? Confidence builder!
Don’t worry MontanaOsprey. Boeing will find a way to get it back somewhere less visible & you are proudly paying the bill.
Airbus has taken 2.2 bill euro most recent writeoffs on the A400- what more do you want them to do ?
Total write-offs are now E6 bill.
The customers have reduced their orders and played footsie too.
Airbus biggest mistake was to take responsibility for the engine as well as the airframe.
Normal military contracts have the governments negotiate directly with engine consortium and its supplied as government furnished equipment.
Seems engines are biting Airbus lately, A400, PW1100, T7000. The XWB seems okay?
Kudos on your classic distraction technique, keesje. (“Focus”, keesje.) The topic I raised was OCCAR’s ability/ willingness to hold AB’s feet to the fire on AB’s A400 cost overruns/ contractual performance shortcomings. Do you have any “on topic” comments?
I am hoping that BA is held to account re the KC46, there must be scope to do so. Regarding the A400 I get the distinct feeling that finger pointing will happen from about 20 directions relating to promises, specifications etc etc until everyone gives up shrugs and passes on the overspend to the respective electorates. It is terribly easy to spend other people’s money.