Airbus Surprises with a Profit jump

While the rival Boeing is in serious trouble, Airbus surprises with a profit jump. The European group is leaving behind misery, such as the A380, and is focusing on more efficient short- and medium-haul aircraft. With success.

The large sales of its A320neo medium-haul jetliners have boosted aerospace and defense group Airbus in sales and profits. As a result, adjusted operating profit jumped in the first six months of the year from just under 1.2 to about 2.5 billion euros, as the company announced in Paris. Airbus exceeded analyst expectations.

The reason for this was the production ramp-up of the A320 family of short- and medium-haul aircraft with new and more efficient engines, which had caused Airbus headaches for a long time. In addition, the larger A350 have best chances to reach the breakeven this year. New CEO Guillaume Faury reiterated the goal of increasing adjusted EBIT by around 15 percent to 6.7 billion euros.

But Faury voiced quiet doubts over the plan to deliver 880 to 890 civilian airliners this year. As far as this objective is concerned, the second half of the year is a “challenge”. A bottleneck is the expanded Hamburg plant, which has problems with the improved cabins for the sought after A321neo. After a recent A321 version for longer distances (XLR) last sold well, Airbus is testing ways to produce more A321, it said.

Faury sees opportunities for expansion of production due to the discontinuation of the Airbus A380 widebody. “We could use freed-up A380 capacity,” he said. He could probably say more in the second half of the year. This could also benefit the Airbus plant in Hamburg, where the final assembly of the A380 is currently taking place. Possible is the extension of the A321 in late 2021 or 2022, said Faury.

If Airbus achieves its goal, the Toulouse-based group would probably replace Boeing as the largest aircraft manufacturer this year. The Americans are fighting with the temporary closure of the Boeing 737 Max after two crashes with hundreds of deaths.

For the first six months, Airbus delivered 389 units, 86 more than a year ago. The new orders run but sluggish in the whole industry. Due to numerous cancellations, Airbus’ backlog increased by only 88 (2018: 206) aircraft in the first half of the year. The net profit also doubled from January to June, to 1.2 billion euros. Sales increased by almost a quarter to 30.9 billion euros.

However, Airbus could be particularly disturbed by the trade dispute: If the US raises tariffs on EU planes and helicopters as threatened, this could hinder exports to the US “and adversely affect the financial and earnings position of Airbus,” the company warned. “Airbus continues to support a negotiated result.”