October 29, 2020, © Leeham News: Airbus announced its third-quarter 2020 financial results today. It has achieved convergence of production and deliveries by delivering 145 aircraft in the quarter and 341 since the start of the year. It will keep its present production rates until next summer when A320neo rates are expected to increase.
The convergence of production and delivery rates combined with other measures has stopped the outflow of cash and Free Cash Flow from operations was positive in the quarter and is expected to stay positive until the end of 2020.
Airbus set the level of production at the beginning of the COVID-19 crisis and has not changed the rates since. It has now achieved a goal of converging production levels and deliveries. The delivery of 145 aircraft in the quarter has stopped the cash bleeding. The quarter ended with a Free Cash Flow before M&A and customer financing of plus €600m. The progress makes Airbus confident enough to give guidance that the Free Cash Flow will stay positive for the rest of 2020.
Turnover was down 40% for the first 9 months at €30.2bn compared with €46.2bn for 2019. Operational profit was -€0.1bn (€4.1bn). The profit including provisions for COVID-19 related reduction of employment etc. was -€2.7bn (€4.1bn).
Airbus will keep rate 40 per month for the A320 until beginning 3Q2021 when it has told suppliers to prepare for rate 47. This is one quarter later than what was previously the plan, said Airbus CEO Guillaume Faury in a media call in connection with the announcement.
Widebody rates will remain at the present five per month for A350 and two for A330. Airbus sees the widebody market to come back last at the back end of the period for recovery, 2023 to 2025.
Airbus has logged 300 net airliner orders during the first nine months with only four cancellations. Its present Cash position is €30.4bn.
Airbus has delivered 341 aircraft in total with 145 during the last three months. The incentive for airlines, that don’t need the aircraft, to still take delivery is that it props up their liquidity.
By delivery, the airline has paid about half the net price in predelivery payments. At delivery, a lessor steps in and pays an agreed price for the aircraft, that the airline then rents from the lessor. This sell-lease-back transaction renders the airline the balance between the agreed lessor price and the pre-delivery payments to Airbus for the aircraft. As such, it is liquidity positive for the airline to take delivery of aircraft as long as the lessor finds the aircraft attractive to buy and offers the airline an interesting price.
Airbus has changed its delivery procedure so that airline staff that flies in for a delivery can feel safe when doing the delivery checks and test flights followed by the flight home of the aircraft. Airbus tests its delivery team for COVID before the work starts and has arranged special accommodation for airline personnel close to its facilities so the crews don’t need to accommodate in Toulouse town.
The result is Airbus can keep deliveries of airliners at the level of its production. There are no aircraft that get stranded and have to wait with the delivery anymore. The inventory of previously undelivered aircraft has shrunk to 135 aircraft by end of 3Q2020.
Helicopters produces black figures with turnover and profits at the level of last year. Defence and Space is down 10% on turnover and 25% on profits, mainly because of a COVID related slowdown in the launcher business. The A400M business is now more stable with five deliveries so far during 2020.