By Dan Catchpole
July 26, 2018, © Leeham News: Airbus posted strong earnings for the year’s second quarter, thanks to better profitability on its A350 and A320 programs. Investors rewarded the news by pushing Airbus share prices to a 52-week high Thursday morning.
However, Airbus lowered its earnings for the full year due to its takeover of Bombardier’s troubled C Series program, since renamed the A220. Airbus plans to deliver 18 of the single-aisle jetliners this year.
The company delivered 303 aircraft in the first six months of the year, and plans to deliver about 800 by year’s end. Deliveries are backed up from the first half of 2018 due to engine supply problems on its A320 program. Persistent teething problems with Pratt & Whitney’s Geared TurboFan engine have delayed A320neo deliveries.
Airbus’ adjusted EBIT (earnings before interest and tax) was €867m for its commercial airplane division due improvement on the A350 program and more cash generation from the A320 program. EBIT for all Airbus divisions was €1.162bn.
The number of A320neos parked without engines outside Airbus assembly plants peaked at about 100 airplanes in late May. The number dropped to around 80 by the end of June, Airbus Chief Executive Tom Enders said during an earnings conference call Thursday.
It will be a “hell of a ride” as Airbus continues to whittle down that number in the second half of the year, Enders said.
The last few months of 2018 could turn into a mad dash as Airbus scrambles to deliver all A320neos promised to customers. The company expects to be caught up with engine deliveries by the end of September. That will then leave Airbus three months to turn the last A320neo gliders into airplanes and deliver them to waiting customers, Enders said.
He said he is “cautiously optimistic” about clearing the A320 backup by year’s end. “We have the engines, we have the airframes, but getting so many aircraft out of storage…is not an easy task and requires additional resources which we are mobilizing.”
For the first time, the company delivered more of the re-engined A320neos than the older A320ceos during the second quarter.
Airbus is committed taking production to 60 A320 a month by mid-2019. Enders told analysts during the conference call they should put that rate into their financial models through 2020. Airbus’ suppliers have committed to 63 aircraft a month, he said.
Demand for Airbus’ widebody aircraft is up considerably this year over 2017. Through the end of June, Airbus recorded 206 net commercial aircraft orders and gross orders for 261. That includes 50 A350s and 14 A330s. Airbus picked up another 44 firm widebody orders at the Farnborough Air Show. However, 10 of those are from airlines not named AirAsiaX. The long-haul low-cost carrier ordered 34 A330-900s, giving it 100 A330neos on order.
Airbus has not committed to taking A350 production past 10 a month, Enders said.
Enders distanced himself from his comments earlier this week suggesting a merger of BAE and Airbus military aircraft operations. He said he only meant to underscore the need for European countries to collaborate, rather than compete, on fighter projects.
“Of course, I was not suggesting that we should merge the military aircraft activities of BAE, Airbus and whoever else rightaway,” he said. “What I was suggesting was that it makes a lot of sense, as we have two projects in Europe – a Franco-German and a British-led project – that politicians as well as industrialists try to converge those, and that there is time to do that because the developments are still some years away.”
In 2012, he pushed for a merger of Airbus and BAE, but the deal failed to garner political support.
‘Airbus has not committed to taking A350 production to 10 a month, Enders said’
I don’t understand that, I thought they were absolutely committed to 10 by year end. Should this say ‘not committed to 13….’
Sowerbob, my apologies for my typo. I corrected it. I meant to say “past 10” not “to 10.” Thank you for catching it!
Airbus should become a massive cash generator going forward. With the exception of the A380 all other programmes are or will become cash positive over the next couple of years. There seems to be no new major projects to use up the cash. They will also benefit from manufacturing in the low currency basket case of the UK post Brexit dramatically reducing the costs of the wings…..
Why will Brexit dramatically reduce the cost of the wings?
As there cost basis in the UK is in GBP, but there internal calculation is in EUR and most of there income in USD…
GBP is heading towards parity with the EUR (with is ca.25% lower than pre-referendum) and the value of a currency is measured against the attractiveness of it’s supporting economy to be invested into it…
So you’re banking on devaluation of the Pound Sterling vs the Euro and the US dollar to give a cost reduction for Airbus’ wings (and presumably Rolls-Royce’s engines, and Messier Dowty’s landing gear and all the rest of the UK manufactured contribution)?
Well, the value of Pound Sterling dropped precipitously after the Brexit referendum, and I don’t remember a corresponding drop in the prices of aircraft or other articles that were built outside the UK but with UK built components – American or European. Likewise, there wasn’t a rush to invest in the UK’s new cheap manufacturing environment, in fact investment dried up or was put on hold.
I’m not an economist (thankfully) but I know enough to point at more egregious examples than the UK. A drop in the value of a currency theoretically makes things cheaper at that instant, but in the longer term it is an inflationary event and one that belies an economy with other troubles significant enough to overwrite that consideration. You don’t see BMW or TATA rushing to invest in Venezuela right now, nor did you in Zimbabwe or Argentina or the Weimar Republic. 90 years of good examples of bad examples.
The fact is, the current uncertainty in the UK is not good for Airbus. Or Boeing. Or anyone.
Does Rolls Royce price their products in GBP?
I would assume they use USD and EUR.
Too true re the disruption caused, I was being slightly facetious though devaluation (as opposed to depreciation) is a one off event and it has broadly been priced into sterling already. It certainly doesn’t need to be matched by runaway inflation at all. This must be saving the UK part of AB a pretty penny already and will continue to do so.
If Airbus do make pots and pots of cash, they can probably afford to keep A380 just for the joy of it. Or maybe finally get round to NEOising it.
They can bury som cash doing an A400M-neo. It has an old wing design by now and the Aircraft is soon due for a MKII. They soon will deliver all the capabilities they promised way back.
Still might be plenty of work with A350-1000 sunset, A330neo weight and cost reductions, A321++/A322 with new wingbox and wing, A320.5 and getting cost out of the A230. The A380neo must wait for “new engine option” i.e. not too expensive RR Advance or Ultrafan and a slender new carbon wing that the Germans will do if Brexit effects the German detail planning of Airbus wing production the slightest.
“So Tom, you would readily agree, as the Brits say, it’s quite a bit more of an uphill slog on the A330Neo sales without the bribes?” (LOL)
Yes, they have a lot to learn here, we all have. http://articles.latimes.com/2006/may/16/business/fi-boeing16
Nicely done, just a little long in the tooth! “May, 2006”. Well, at least it’s still in this century. LOL And, still waiting on the Serious Fraud Office. Inquiring minds still want to know, when will there be an SFO AB “perp walk”? SFO missed a golden opportunity at Farnborough!
“British and French prosecutors met last month to discuss the terms of a settlement deal known as a Deferred Prosecution Agreement (DPA) following a probe into the use of middlemen to sell jetliners….
The investigations began after Airbus drew the attention of regulators to inaccurate declarations it had made to Britain’s export credit finance agency over payments to sales agents.”
The SFO ( UK ) and the PNF ( French fraud police) seem to be discussing a DPA, so no perp walk likely
You only need to look deep into Slovakia F-16 buy.
So selling 787’s below production cost is OK?
Apples and Oranges and there is no such thing as legal or justice.
One is a trade issue if you have a product competing (or not) ala Boeing and BBD (and Embraer and BBD etc)
The other area (bribes) is criminal but as its RR and Airbus, of course they will pay a fine (RR has) and no one held to account.
Same in US with the 2008 meltdown.
We had a female age about 16 or 17 drunk out of her gourd with a background of drunk and drugs run over a bicyclist. She served no time. She was white, cute and her family had plenty of money.
So it goes.
Great news for Airbus group
Interesting on American and keeping moving both 737 and the A321 down the road for buying.
Wasn’t the fact that fuel prices were high that drove the who shebang a while back to more efficient aircraft, orders into 2025 and all that?
And for those who did not think that BBD would benefit there is this tidbit.
And the production plans of the now A220:
Seems strange American Airlines is delaying more fuel efficient planes. But I guess they do not want to retire the other planes in their fleet.
The thirsty older planes might have a book value that they do not want to adjust this quarter as it shows directly on the bottom line.
Thanks, some good reading in those links. AA a bit shaky at this stage.
Maybe someone is looking at a legacy airline 4-sale?
About 80 A320 gliders at the end of June. I wonder if that includes A321 planes, too? I know it doesn’t include A220s, but from what I understand there are some of those sitting around waiting for engines. They don’t like to talk about the specifics when it comes to planes waiting for big parts like the engines.
Airbus has real problems selling below production output for multiple years, with two widebody products on life support still, and the a220 no where near profitability. Saying A350 sales are up is great, but that’s in reference to a two year near complete drought.
Their free cash flow from operating activities (before mergers and acquisitions) for the past six months was negative 4 billion euros. Fanboy dreams of massive A220 deliveries and profits are, for the near term, just that: dreams.
Selling below output? Seriously? Are there hundreds of white tails sitting on tarmac somewhere that no one else has spotted?
In reality, A & B are selling all the planes they can build, any white tail production is an exception to the rule.
I think the comment relates to book to bill and ignores the massive backlogs. The current preoccupation of both OEMs is to increase production to drive down those backlogs, sales of course still being important