Bumpy switch to new models hits Airbus Group’s Q3 profits

  • Business
  • Thursday, 27 Oct 2016

PARIS: Airbus Group posted lower than expected third-quarter profits, led by a faltering performance in its core commercial jet division and continued weakness in the commercial helicopter market, but broadly maintained its full-year financial forecasts.

Europe’s largest aerospace group, which includes the world’s second-largest jetmaker behind Boeing, said quarterly operating profit before one-off items fell 21% to 731 million euros (US$796mil). Revenue fell 1% to 13.95 billion euros.

The commercial jets unit saw a 26% slump in its profits despite 4% higher revenue, with the company highlighting difficulties in the supply chain for the production of its new A350 and A320neo jets. Profits at Airbus Helicopters fell 29%.

The results were below average forecasts, though the company had earlier sought to dampen analyst expectations as it makes a tricky transition to producing new aircraft models, according to sources.

Analysts had on average forecast quarterly core operating earnings would be down 19.3% at 743 million euros on revenue up 1.9%, according to a Reuters survey.

But finance director Harald Wilhelm dismissed concerns over the aerospace business cycle, saying more airlines were trying to get planes earlier than those that wanted to cancel or defer orders.

“The commercial situation continues to be robust,” he said.

Airbus has struggled to switch to producing a new neo version of the A320 narrowbody airliners due to delayed deliveries of engines from Pratt & Whitney.

The company said it had now received “firm commitments” from engine makers that they would meet the A320neo schedule but the mix of higher-priced A320neos in total A320 deliveries was weaker than expected.

Meanwhile deliveries of the new A350 widebody jets have also been held up, by problems with the supply of cabin equipment.

However, Airbus expressed greater confidence that it could bring down costs for the A350 and said it was working towards meeting its target of more than 50 A350 deliveries in 2016, having delivered 29 so far, including three this month.

Several analysts said after the report that the company had managed to squeeze out significant risk from the A350, Airbus’ answer to the Boeing 787 Dreamliner and also a rival to the 777.

However, there are still questions over how quickly A350 production can be increased in 2017. Wilhelm told analysts suppliers were “not yet where they need to be”.

“This is not the time to celebrate success. We need to be totally focused,” he said.

Wilhelm also issued a warning to suppliers involved in mergers that they should not let dealmaking divert attention from executing on contracts to prevent new slip-ups.

He was responding to a US$6.4bil deal earlier this week for Rockwell Collins to buy B/E Aerospace, one of the largest makers of aircraft seats and cabin equipment.

Nevertheless Airbus reaffirmed its full-year financial forecasts, including stable operating earnings and free cashflow before M&A activity, along with more than 650 jet deliveries.

Wilhelm later told reporters Airbus expected to beat this last target with over 670 deliveries.

However, it abandoned a previous target of regaining access to European export credit financing this quarter, which means it may have to step in with more financing to airlines. – Reuters

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Business , Airbus , profits , jet , helicopter , target


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