Airbus predicts earnings rise as jet unit raises rates

  • By Andrea Rothman and Robert Wall Bloomberg News
  • Wednesday, February 26, 2014 10:52am
  • Business

TOULOUSE, France — Airbus Group said profit rose 21 percent last year and predicted earnings will grow in 2014 as its namesake aircraft division moves to lift production of its best-selling single-aisle planes.

Earnings before interest, tax and one-time items rose to 3.6 billion euros ($5 billion), exceeding a company forecast of 3.5 billion euros, Toulouse, France-based Airbus said Wednesday. Sales gained 5 percent to 59.3 billion euros. Airbus said it will lift A320 production to 46 a month in 2016 from 42 now.

Airbus delivered a record 626 planes last year, and is targeting a similar level in 2014 as airlines seek fuel-efficient models. Airbus rival Boeing is lifting production of its 737 single-aisle models, moving to 47 a month by mid 2017, to satisfy demand for an aircraft type that forms the backbone of most global airline fleets.

“Order intake was particularly strong for our Airbus commercial aircraft and provides a solid platform for the future growth of the group,” Chief Executive Officer Tom Enders said in a statement. “Strong demand allows us now to increase the single-aisle production rate.”

Enders said reaching cash flow break-even remained a target after a shortfall last year when “execution issues” led to an outflow before customer financing of 515 million euros. Airbus expects to reach positive cash flow after 2015.

The aircraft subsidiary contributes two-thirds to revenue of the parent company, which changed its name from European Aeronautic, Defence &Space Co. last month to reflect Airbus as the main driver for sales for the foreseeable future.

Over the past five years, Airbus has steadily increased A320 series production, going from 36 a month at the end of 2010 to 38 by the middle of 2011 and then up to 40 a month in the first quarter of 2012. The company now makes 42 a month, mainly in Toulouse and at its Hamburg production facility.

“Management has considerable credibility, and 2013 was a year of delivery for Airbus,” said James Buckley, a portfolio manager at Baring Asset Management in London. “The order pipeline is strong, and they have positive order flow.”

Airbus is preparing production of an updated A320, called he A320neo, that offers two choices of more fuel-efficient engines. The first A320neos are set to begin service with customers in late 2015.

Net income rose 22 percent last year, even after charges for restructuring and for the A350. The order intake gained to 218.7 billion euros from 102.5 billion euros the prior year. The company said it will propose a dividend of 75 cents, up from 60 cents in 2013.

In the fourth quarter, 434 million euros in charges were related to the A350 wide-body aircraft and another 292 million euros to restructuring, mainly at the space and military subsidiaries. For the year, charges reached 913 million euros.

Airbus, which has said it will deliver the first A350 this year to Qatar Airways, said the program remains challenging, and that cost-assumptions could lead to an increasingly higher impact on provisions. The planemaker has booked 814 orders for the twin-engine, long-range jet from 39 customers.

The parent company said in December it planned to cut about 6,000 jobs at its Airbus defense and space unit, in France, Germany, Spain and Britain, including about 250 in corporate functions in France, principally in Paris.

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