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By the Leeham News Team

Aug. 5, 2024, © Leeham News: “...We are evaluating all strategic options given the nature of the situation, such as restructuring, ...portfolio review, cooperation and potential M&A, and that might be a combination of some of that.”

This was an excerpt of the opening statement of Airbus (AB) CEO Guillaume Faury on the July 30, 2024, earnings call, discussing the situation at Airbus Defense and Space.

For the second quarter, Airbus booked a €989mn charge at the division and blamed it on changing market conditions, disruptive new players and improperly balancing risks and rewards. Faury also mentioned ‘proper contractual conditions’, which more than likely is coding for contracts that were underbid. He continues:

“We've also implemented a highly selective bid-no-bid strategy, including the need for an increased technological maturity threshold and assessment before any firm proceedings.”

Left specifically unsaid, but implied, is the possibility of spinning off the Defense and Space unit, with a focus shift to its core business: commercial aircraft.

While other defense contractors seem to be able to negotiate contracts that earn a tidy profit, the two largest airframe manufacturers, Airbus and Boeing, struggle to do the same.