Airbus Gets Cash Boost From Flurry of Jet Deliveries

(Bloomberg) --

Airbus SE generated positive cash flow for the third quarter in a row, while warning that new coronavirus flareups threaten progress toward a recovery in air travel.

The European planemaker reported 1.2 billion euros ($1.5 billion) in adjusted free cash flow between January and March, when aircraft deliveries surpassed the mostly pre-pandemic first quarter of 2020. Profit reported Thursday in a statement came in ahead of analysts’ estimates.

Chief Executive Officer Guillaume Faury has been able to juggle delivery schedules while pressing customers with the means to keep taking new planes, despite frustratingly slow progress toward a return to normal for the travel industry. On Thursday he reiterated a target to increase production of Airbus’s top-selling A320-series jets later this year.

Still, setbacks in fighting the disease have forced governments to tighten borders, weakening the airlines and leasing firms that make up Airbus’s customer base. Most recently, a virus surge in India has quieted one of the world’s strongest aviation rebounds. Airbus warned that the outlook hinges on no further disruptions to air travel or the global economy.

“We still face uncertainties which result in a lack of predictability,” Faury said on a conference call. “The path to recovery will not necessarily be linear.”

While Airbus stuck to financial targets it set out earlier this year, developments over the next month or two will be key for the Toulouse, France-based planemaker and its U.S. rival Boeing Co.

A lack of coordination in Europe on travel restrictions remains a concern, as well as the situation in India, where Airbus has major customers like IndiGo. Faury said the company hadn’t yet seen a direct impact in the region, but he doesn’t expect things to be as good there as they had.

Developed countries are rapidly inoculating their populations, but dangerous new virus strains, flareups and safety questions about vaccines have made authorities cautious about lifting restrictions.

At stake is the summer high season whose start has already been delayed. On Wednesday, Boeing reported that it burned more cash than expected during the first quarter.

Boeing Results

The U.S. planemaker was in the midst of a 20-month grounding of its 737 Max when the pandemic started, and in recent months has struggled with manufacturing issues that held up deliveries of that plane and the larger 787 Dreamliner.

Still, Boeing CEO Dave Calhoun said he expects this year will be a “key inflection point” for the industry as vaccines gain ground. He also vowed to compete with Airbus in the narrow-body space, saying Boeing intends to “hold its own.”

Output Pace

Airbus reported adjusted earnings before interest and taxes of 694 million euros for the first quarter, and revenue of 10.5 billion euros.

The company stands by earlier targets for the full year: breakeven free cash flow, excluding the impact of M&A and customer financing, and 2 billion euros in EBIT. Those figures depend on Airbus meeting a full-year target for at least matching 2020’s 566 jet deliveries.

Charges excluded from adjusted EBIT:

- EU29 million related to A380 costs

- EU177 million for a dollar pre-delivery payment mismatch and balance sheet revaluation

- EU26 million for compliance and other costs

Airbus significantly sped its deliveries in March to hand over a total of 125 aircraft for the first quarter. That beat last year’s 122 handovers, easing some concern over the company’s backlog of undelivered jets.

The company has set plans to increase the A320-series production rate to 43 per month in the third quarter and 45 by year-end. Those figures represent targets that were lowered earlier this year from a more ambitious ramp-up. Current output for the single-aisle family is at 40 per month.

Internal Revamp

This month, Faury moved to centralize power with a management shakeup and plans for the biggest revamp of Airbus parts production in a decade. Subsidiaries that make wing and fuselage sections will be moved in-house, while some work in Germany will be moved to a third division that also supplies external customers and could be sold.

Two top lieutenants will leave the company -- Dirk Hoke, the head of the defense and space division, and Chief Technology officer Grazia Vittadini.

Hoke, a candidate for CEO when Faury won the job two years ago, is leaving after European partner countries reached agreement on the Future Combat Air System project. Vittadini’s departure will see the roles of chief engineer and CTO combined as the company evaluates high-stakes plans for next-generation products.

On Wednesday, a defunct Airbus unit was fined 28.1 million pounds ($39 million) by the U.K. Serious Fraud Office after pleading guilty to one count of corruption.

GPT Special Project Management Ltd. was charged over work carried out for the Saudi Arabian National Guard, in a separate case to Airbus’s agreement made with the prosecutor last year to settle bribery allegations.

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