Airbus Q1 core profit plunges as pandemic woes start to bite

Airbus on Wednesday posted a 49% slump in first-quarter core profit and called for an industry-wide campaign to restore confidence in flying after the coronavirus pandemic triggered the “gravest crisis the aerospace industry has ever known”.

Europe’s largest aerospace group also highlighted plans to save cash after gushing 8 billion euros in the first quarter, including a record 3.6-billion-euro fine to settle corruption investigations in Britain, France and the United States.

“All nature of costs are now being reviewed,” CEO Guillaume Faury told analysts.

Airbus has been unable to deliver more than a handful of aircraft since Europe-wide lockdowns began in mid-March and Faury said he expected similar difficulties in the second quarter before a clearer picture emerges in around June.

Chief Financial Officer Dominik Asam told a telephone news conference he expected some recovery in the third quarter before returning “basically to a neutral situation where we don’t use cash anymore” in the fourth.

Airbus expanded furlough schemes on Tuesday by sending home 3,200 workers in Britain after putting 3,000 workers on government-backed partial unemployment schemes in France, and Faury said thousands of German staff could also be affected.

He did not say whether Airbus would carry out forced redundancies but told staff last week to prepare for “more far-reaching measures” to balance the group’s costs to the reduced outlook for aviation in coming years.

“We are doing everything we can to be in the best shape for competing again later,” Faury said on Wednesday.

Airbus said first-quarter adjusted operating profit fell 49% to 281 million euros ($304.7 million) as revenue dropped 15% to 10.631 billion euros, mainly due to clouds that were already gathering over jetliner demand before the coronavirus outbreak.

Planemakers, airlines and suppliers have been left reeling by the pandemic, which has crippled passenger travel and catapulted major economies into recession.

Airbus suspended its outlook and dividend and negotiated new credit lines last month. It said on Wednesday it does not immediately see a need for further government support.

Airbus this month cut jet production by between one third and 42% depending on the model, compared with previously announced rates. It could cut production again after reviewing the situation in June if a new surplus builds up, Asam said.

Industry sources say Airbus is currently producing few aircraft as it adapts to social distancing rules.

Airbus will reduce 2020 capital expenditure by around 700 million euros to around 1.9 billion euros and defer or suspend activities which are “not critical”, Faury said.

However, he stressed that Airbus continues to develop its fast-selling A321XLR.

Reuters reported on Tuesday that planemakers are drastically slowing other new projects to save cash.

In the longer term, Airbus remains committed to a new generation of green aircraft, and will intensify a focus on onboard passenger health as well as safety, Faury said.

Planemakers are drastically slowing work on new projects to save cash as they focus on surviving a downturn expected to last well into this decade, industry sources said.

Plane giants Airbus and Boeing are expected to emphasise immediate priorities over long-term plans in financial results on Wednesday, as air travel remains severely disrupted by the pandemic.

The fresh approach was trailed by Boeing’s decision to scrap a $4.2 billion tie-up with Brazil’s Embraer, whose engineers had been expected to play a key role in developing the next round of Boeing jets.

Boeing shelved plans in January to develop a pair of jets to replace the 757 and 767, known as the New Midsized Airplane (NMA) programme, while focusing on getting its grounded 737 MAX back in service.

Since then, Boeing has been looking at distilling the two-aircraft NMA programme into one new 757-style plane, while studying a more modest 767 upgrade, sources said.

That would have laid the groundwork for the future MAX successor, an embryonic project known as Future Small Airplane.

“Everything on NMA, FSA and so on has been stopped for now,” a person familiar with the matter said.

Other projects likely to take a backseat include a previously unreported plan to give the 767 wide-bodied jet a new lease of life with new wings and engines.

Reuters