Airbus lifts on earnings surge, warns of full-year drag from Bombardier deal

Airbus shares have jumped after it booked a jump in second-quarter earnings and trimmed its full-year outlook.

An Airbus 'BelugaXL' aircraft comes into land at Toulouse-Blagnac on July 19, 2018, after its maiden test flight of some four hours. Picture: AFP

Airbus has delivered bumper second-quarter earnings growth, boosting its stock, even as it trimmed its full-year outlook after taking control of a smaller jetliner program to expand its product line-up to battle Boeing.

The company said its closely watched adjusted earnings before interest and taxes more than doubled to €1.2 billon ($US1.4bn), in part reflecting improved profitability on its A350 long-range jetliner and more deliveries of its popular A320neo single-aisle plane.

Shares in Airbus were more than 5 per cent higher early Thursday.

Still, the company said its full-year earnings would come in lower than initially projected, a result of its takeover of the A220 plane program, formerly called the CSeries, from Canadian rival Bombardier Inc.

Boeing and Airbus, long bitter rivals in the market for planes with 150 seats or more, are expanding where they battle.

Airbus on July 1 took control of a joint venture making the A220, which seats between 100 and 140 passengers. Lacking the market clout of larger plane makers, Bombardier was forced to sell following initial slow sales and other financial difficulties over the plane’s development cost. Boeing this month announced plans to take over the regional airliner business of Brazilian plane maker Embraer SA, also pushing it into the market for 100-seater jetliners.

Airbus began its reign in charge of the A220 with a splash. It announced deals for 120 planes with JetBlue Airways Corp. and a still-unnamed carrier being set up by JetBlue founder David Neeleman. The guidance shift demonstrates, though, that the transaction isn’t without headwinds. It often costs manufacturers more to build early production planes than they are sold for as they iron out manufacturing kinks and become more efficient.

Adding the A220 also comes with a €300 million cashflow headwind this year, the Toulouse, France-based company said. Most of the cash drain this year, though, will be covered by Bombardier.

Airbus said it would deliver 18 A220 planes this year and stuck to its guidance of shipping 800 of its other aircraft in 2018. Delays in receiving engines for its A320neo planes held back first half deliveries and left Airbus with about €4bn in cash outflow in the first six months against a target of delivering around €2.95bn in free cash flow by year-end. Most of that is expected in the final weeks of the year as Airbus recovers from delayed plane handovers.

Chief executive Tom Enders said it would be “a hell of a ride” to get all the promised planes to customers, but added he was “cautiously optimistic” the goal would be achieved.

Airbus hopes to have received all the engines required to meet the target by the end of September, he said. The company will then be left to scramble to fit them on the planes and delivering those in the final weeks of the year, Mr Enders said.

The Airbus boss, who is due to depart next year, said he was encouraged by an uptick in wide-body plane orders at this month’s Farnborough International Air Show. Deal volume this year already surpassed the low levels seen in 2017 for the bigger, more expensive long-range planes. However, he added, Airbus would wait to see how the market evolved before committing to a boost in A350 production. Boeing has already committed to boosting output of its rival 787 Dreamliner.

Net profit, which reflects accounting adjustments to financial instruments Airbus uses to insulate itself from currency volatility, fell 69 per cent to €213m, also reflecting a higher tax rate.

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