Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
Airbus 1H profit; delays A320neo production rate hike due to supply chain challenges
July 27, 2022, © Leeham News: Airbus Group today reported flat revenues for the first half, year-over-year but less profit.
Revenues for the six months this year were €24.8bn vs €24.6bn. Net income was €$1.9bn vs €2.2bn, a decline of 15%. Free cash flow was €1.65bn vs €2bn. The Group ended the second quarter with €7.2bn in cash, down from €7.7bn a year earlier. Total liquidity was €27.6bn.
Airbus said it still has a goal of producing 75 A320neos a month by 2025 but that it will adjust the ramp-up rate between now and then. Challenges with the supply chain slow the ramp up. Airbus now targets early 2024 for a rate of 65/mo, vs the second half of next year, a six-month delay. Entry into service for the A321XLR is now targeted for early 2024 vs 2023. Increasing production rates for the A330 and A350 depend on the supply chain, the company said.
Boeing has slowed the production rate ramp-up for the 737. It now will maintain a rate of 31/mo for the remainder of this year, also citing supply chain challenges. It had planned to increase production to 38/mo later this year.
Subsidiary Results
The commercial unit reported earnings before interest and taxes (EBIT) of €2.276bn vs €2.291bn. Helicopters reported EBIT of €215m vs V183m. Defence and Space EBIT declined to €155m from €229m.
The problematic A400M took another charge, this time for €0.2bn. “Risks remain on the qualification of technical capabilities and associated costs,” Airbus said.
Demand
Airbus CEO Guillaume Faury said demand for the A320 family remains strong. Demand, though still weak, is beginning to recover for the A330neo and A350. Airbus is studying “several scenarios” to boost production rates.
Airbus, like Boeing, is hurt by the lack of engine deliveries. There were 26 “gliders” at the end of June. “We believe based on information from suppliers hope to be back to zero gliders by the end of this year,” Faury said. He does not expect cancellations.
The press release is here. The earnings call presentation is here.
Airbus gross debt appears to be ca. $35B, with net debt of ca. $7.5B.
The corresponding figures for BA are $63B and $52B, respectively.
AB has liquidity of almost $28B — which gives it much greater funding options for investment.
Thanks for those debt numbers. I keep seeing mention of a rate of 31 for MAXs (“maintain a rate”, here) v. evidence of a present rate of 26 or so.
Lost production for the reminder of the yr quickly add up to at least a couple dozen. MOL won’t be a happy customer.
Boeings figures are out
They refute your claims , Long term Debt was $56.8 bill this time last year now is $51.8 bill
https://s2.q4cdn.com/661678649/files/doc_financials/2022/q2/2Q22-Press-Release.pdf
On page 2, table 3 of your link it says total debt is $57.7B, total liquidity at $11.4B.
Even the numbers in the financial positions are a bit lower, the overall looks is pretty bleak.
And interesting to see a negative! capital of almost $15B. In other countries you have to file for bankruptcy with negative equity.
Which countries. That so ludicrous , some have found that 20% of listed companies in Europe have negative equity.
Its just a technical term for investors, nothing more as being insolvent is the term when you cant pay the bills and bankruptcy looms
Seems like Duke missed this part of Matth’s comment:
> On page 2, table 3 of your [DoU’s] link it says total debt is $57.7B, total liquidity at $11.4B. <
Switzerland is one of those countries.
And it’s just a technical term, sure. It essentially means, that all the companies assets are smaller than the companies liabilities. I’m probably too conservative, but as a supplier I’d be wary of doing business with such a company, as the owners have withdrawn already more than their stake.
And the owners themselves don’t perceive it’s worth investing money in it.
@DoU
I said “gross debt” and you said “long term debt”. Even if you don’t *know* the difference, can’t you at least *guess* it?
Hint: what’s the opposite of “long”?
It’s typical of that poster. Deflection tactics? … financial illiterate?? 🙄
@ DoU
Long-term debt went from $56.8B to $51.8B.
Did you bother looking at short-term / current debt? It grew in the same period from $1.3B to $5.4B. Long-term debt becomes short-term debt when its maturity shrinks to less than 12 months.
Next up: did you look at the difference between accounts payable ($9.58B) and accounts receivable ($2.99B)?
51.8 + 5.4 + 9.58 – 2.99 = 63.79
“Did you bother looking at short-term / current debt? It grew in the same period from $1.3B to $5.4B.”
It’s how some co. used to financial engineering fake +FCF: postponing payments to suppliers.
And yet, Airbus market cap is 15 percent below Boeing, and Airbus share is performing like Boeing ytd despite the gap being up to 40 percent 2 months ago.
Forecasted deliveres down only to 700 from 720, while Boeing adjusted their MAX deliveries to 400 from 500.
What are your sources for the debts level for both.
Interestingly during the q2 conference, Airbus said that the EBIT guidance stays constant at 5.5 billion as well as FCT guidance staying the same despite 20 less deliveries because they could sell Russian slots to a higher than expected price.
That is in contrast to Boeing delivering 53 percent but revenues increasing only by 3 percent, seems like Airbus keeps improving margins and demand an even higher premium which the market is happy to pay, while Boeing can only sell at a much steeper discount.
Not sure how Boeing wants to pay off their debt with strategy if at all
$5 bill lower debt for Boeing in numbers just released compared to this time last year.
LOL
Like Boeing, you like to point out numbers that seem positive while ignoring the negative.
Look at cash on hand evolution, which went from 32.4 billion to 11.4 billion now. https://www.macrotrends.net/stocks/charts/BA/boeing/cash-on-hand
Now look at debt. https://www.macrotrends.net/stocks/charts/BA/boeing/long-term-debt
Cash decreased by 10 billion as compared to last year, while debt only by 5 billion.
Net debt increased by 5 billion.
You were asking how Boeing can pay of its debt?
It was a stupid question
It did .
‘nett debt’ is meaningless as its gross debt that has to be repaid. Rather than keeping cash in the company they seem to have down paid debt as it came due. So they are reducing the debt owing !
ROFL
@ DoU
Net debt is not “meaningless”, because it is a measure of the ability to pay off gross debt.
The higher the net debt is, the lower the ability to reduce gross debt.
Making this all up as you go along — again?
nett debt is a measure of how a business or company can handle more borrowing, an increase in gross debt
Boeings financials say they have reduced gross long term debt by $5bill- the normal way of what is otherwise described as ‘paying down its debt’
Net debt = gross debt minus liquidity.
Thus, net debt increases when liquidity decreases, and vice versa.
Low liquidity –> inability to pay off debt.
Boeing only “paid down” $0.5B in debt (and decreased liquidity in the process). The rest of the decrease in long-term debt was just a re-labeling as short-term debt
Calling other commenters “stupid” is not a good idea, Duke.
While we’re both here, though: do you have any news for us on the “retractions” you said that were forthcoming from the fine ABC article regarding the Boeing 737’s safety issues?
Dukeofurl said, on June 29, 2022:
“Greater minds than mine will working on the falsehoods in [ABC’s 737 MAX ongoing safety incidents] story and will be added to the so so long ABC retractions list”
The ABC article is still up, without any retractions:
https://www.abc.net.au/news/2022-06-27/boeing-737-max-in-mid-air-emergencies-as-us-set-to-launch-probe/101175214
Awaiting your reply, Friend.
I guess that commenter is too busy calling others here “stupid” and “illiterate” (that last term is especially rich, considering its source).
Meanwhile, crickets..
The remarkable thing is: he keeps getting egg on his face (BIG time), but he continues in the same vein nevertheless…
Hence “EBoT”: Energizer Bunny of Trolls.
Be careful: Scott is being more strict of late.
Better not escalate matters — a “certain other commenter” is already doing enough name-calling as it is…which is a pity, because it detracts from the otherwise very interesting and informative discussions here.
@Bryce is correct, and BTW DoU has been put on notice, too.
Im very happy to abide by Scotts standards of commenting. hes got better things to do.
Just certain disruptive comments seemed to have open slather gave the impression that anything goes. Good to see it doesnt
Boeing’s financial statements are obfuscation’s. They wrote off $40 billion at the start of the 787 program and now continue to write off billions fro the same pathetic program. Almost $30 billion for the mad max debacles, approximately $6 billion on the tanker project. All three continues to eat up the write offs. Then there’s the 777X…. Massive write off charges. Nothing about this or if a TIA is close to fruition. They divert real attention from the problems on just the 787 by stating “we are close” …… American thinks this by what Boeing advises. AA says these things because they are being lied to by the manufacturer.
When they end up canceling the mad max 10 how much will that be written off for a ‘charge’?
Boeing is unethical and once again proves this in today’s market call.
They hide under the news that they made a small profit to once again please the Wall Street masters.
How are all these massive losses hidden and just seem to disappear? No one ever asks these questions.
Forget the comparison to BA’s financial results: when looked at in less relative terms, has anyone noticed that AB’s financial results were downright disappointing? The stock market concurs — with a 6% drop this morning.
Supply chain woes are causing havoc in a whole list of sectors. In the case of aviation, they’re particularly troubling because the industry was so badly affected by the pandemic…and is probably heading into another demand downturn caused by high inflation / fuel prices.
At least AB has more flesh on its bones at present: in BA’s emaciated state, these woes will have a much greater erosive effect.
Have you seen the H1 2021 results? Those results were ridiculous. To triple profit margins that year…. hard to compare to that and the stock barely moved that year
I know what you mean.
But, apart from the comparison with last year, there’s also the guidance aspect — which reflects the negative impact of supply chain issues on current and near-future operations. And that guidance was disappointing.
The stock markets are nervously looking at this earnings season for signs of recession — and analysts are not easy to please.
I’m not sure whether a planned ramp up to 75, order books full and supply chain issues would signal a recession in my book.
The stock market would call a recession even if the pendulum swings both ways
Sort of.
The stock market is currently fixated on forward P/E ratio. If future earnings go down below expectation, then the forward P/E ratio goes up — and that’s not a “buy signal”. Analysts only look about 12 months ahead.
Back on Main street instead of Wall Street, delays in ramping-up orders cause re-scheduling of slots, higher unit costs, etc.
Not the end of the world — but certainly a major annoyance.
@Bryce
There’s an energy crisis brewing. There’s no way major industrialized countries can cut gas consumption by 15% without severe impact on industrial production e.g. steel, aluminum, glass & chemical etc.
Another “post-Farnborough” order for Airbus:
“IAG places order for 37 Airbus jets with an option for another 50”
https://www.lse.co.uk/news/IAG/iag-places-order-for-37-airbus-jets-with-an-option-for-another-50-l321cjkc3rez5zi.html
Still mystified by the 150 MAX order that IAG firmed up not that long ago.
Are IAG going to launch another LCC?
I’m also mystified by that order.
A new LCC may be on the cards.
Or maybe it’s some sort of front for Qatar, which is part owner of IAG.
Who knows?
Delivery from 2025 to 2028. Options delivery from 2028 to 2030.
Regular top up for BA, Air Lingus and/ or Iberia who that luggage container infrastructure across their networks. The previous NEO order was 2 months ago. https://aviationsourcenews.com/news/iag-confirms-new-a320neo-orders/
Interesting:
“Ethiopian Airlines orders the Airbus A350-1000”
“Ethiopian Airlines Group has upsized four of its A350-900 on order to the A350-1000, becoming Africa’s first customer for the aircraft. Ethiopian Airlines has already ordered 22 A350-900s, of which 16 aircraft have been delivered. With the A350-1000 upsizing, Ethiopian Airlines’ backlog consists of four A350-1000s and two A350-900s.”
https://aeronewsglobal.com/ethiopian-airlines-orders-the-airbus-a350-1000/
Way to go AB….
Clearing out those 4 Qatar whitetails…
No secret where they’re coming from!!!
They say only Boeing offers discounts on overstocked merchandise !!! 👍
AB is getting rid of its whitetails very expeditiously 😏
At BA, there are still more than 200 MAXs sitting around in Corrosionville.
But, who says that the Ethopian -1000s are ex-Qatar?
“At BA, there are still more than 200 MAXs sitting around”
Yes, but this is a little misleading. At June 30, there were 290 MAXes in inventory but 140 are for China. Once China reopens (and it will), these will go. The other 150 include new-production (as opposed to legacy storage) aircraft (I don’t know this split) that might have traveled work or which were ready but not yet delivered.
What’s the normal number of new-builts waiting for customers to take delivery say in 2019?? I believe it was a well-oiled operation that pushed out *every jet* before each q.e./y.e.
@Pedro: I don’t have that data.
Thanks.
If I remember correctly, isn’t it closer to 300 MAX collecting dust (more like 320)? Why is there no meaningful reduction, say a dozen or two in every quarter, from y.e. 2021??
Edit:
say *more than*a dozen or two in every quarter, from y.e. 2021??
https://www.reuters.com/business/aerospace-defense/taiwans-china-airlines-eyes-a330-replacement-future-freighter-options-2022-07-28/
‘Boeing Has Bottomed. It Could Recover Quickly.’
“..Boeing said in its earnings call that it expected FAA certification of two additional variants of 737, the Max 7 and Max 10, later this year. So, the company’s most important commercial product will likely be generating steady cashflow for the rest of the decade.
With regard to widebodies, CEO Calhoun signaled that production problems with the highly profitable 787 Dreamliner have been resolved, and the highly profitable twinjet will likely resume deliveries in the third quarter. With 120 finished aircraft in inventory, Adam Levine-Weinberg of The Motley Fool figures Dreamliner could generate up to $10 billion in cash over the next two years..”
https://www.forbes.com/sites/lorenthompson/2022/07/29/boeing-has-bottomed-it-could-recover-quickly/
Lots of “coulds”, “shoulds”, and “likely” from Mr. Thompson, but worth a read for
the general tone. Interesting claims on MAX™-7 and -10, too.
Adding: and yet we again see the claim that the 787 is “highly profitable”.
Mmm.
787 “…will likely resume deliveries in the third quarter…”
Ahhh…so it’s now “third quarter” rather than “August”.
And it’s only “likely”.
Surprise!
““..Boeing said in its earnings call that it expected FAA certification of two additional variants of 737, the Max 7 and Max 10, later this year”
Srsly?? BA said that???
I was equally surprised. 😉
We’ll see how it goes.
Nope. The transcript is here:
https://seekingalpha.com/article/4526419-boeing-company-ba-ceo-david-calhoun-on-q2-2022-results-earnings-call-transcript?source=feed_all_articles
The only mention of the MAX certification is:
” … on the regulatory front, we are working constructively with the FAA. We have our heads down. We’re working towards certification by year-end on the -7 and the -10.”
But everyone, including BA and Delta, knows the MAX 10 is not going to be certified in time.
No analyst bother to ask the tough question, is Calhoun going to cancel both MAX 7&10 if they fail to meet the y.e. deadline. Ron Epstein does not appear in the transcript.
“We have our heads down”
He probably meant to say: “We have our heads in the sand”.
https://mobile.twitter.com/AvWeekSean/status/1553161763352461312?cxt=HHwWgIC-9aGZ-I0rAAAA
https://mobile.twitter.com/dominicgates/status/1553095018214109184?cxt=HHwWgMCl8Zfs2Y0rAAAA
Reuters: U.S. watchdog finds ‘weaknesses’ in FAA oversight of Boeing airplane flight manuals
From defence news:
– West said Boeing recorded about $400 million in charges, including a $147 million charge on the Navy’s MQ-25 Navy refueling drone program stemming from higher costs to meet technical requirements.
– Boeing reported a $93 million charge on the commercial crew space capsules it’s making for NASA due to launch manifest updates.
– West said the T-7A Red Hawk trainer, VC-25B Air Force One and KC-46 tanker programs also recorded charges, mostly as a result of supply chain and inflation problems.
– The contractor warned in its SEC filings that there could be more losses ahead for its Air Force One and KC-46 programs.
BDS is not able to provide much-needed support to BA.
https://www.washingtonpost.com/business/boeing-rolls-the-dice-on-china-for-expanded-737-max-output/2021/10/27/a2166f26-374b-11ec-9662-399cfa75efee_story.html
-> China still hasn’t signed off on the return of Boeing Co.’s 737 Max. But the planemaker isn’t backing off its target for an aggressive step-up in production starting in early 2022. Does the company know something the rest of us don’t, or is it just foolhardy?
-> […] Max orders have rebounded as airlines recover from the pandemic, but the *31-jets-a-month production pace looks aggressive without deliveries to China*. Boeing currently has about 370 Max jets in inventory, with about a third of those designated for Chinese buyers, Chief Financial Officer Brian West said. It aims to clear the vast majority of that stockpile by the end of 2023, based in part on the assumption that China deliveries resume in the first quarter. Cowen analyst Cai Von Rumohr estimated Boeing would need to deliver more than 500 Max jets next year to meet its goals, pointing out to Calhoun on Wednesday that this implies “a huge increase” compared with the roughly 20-a-month average from the third quarter.
https://mobile.twitter.com/LeehamNews/status/1554114352508051457?cxt=HHwWgoChmaCxqZErAAAA