Plane maker plays down gaining market share due to rival's 737 MAX problems

By Robert Wall 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 1, 2019).

Airbus SE said its quarterly earnings were boosted by higher plane deliveries but played down the prospect of immediate market-share gains from Boeing Co.'s 737 MAX woes, even as the European aerospace giant is on pace to regain the title of world's biggest plane maker.

Airbus is already increasing output of its popular A320 single-aisle plane, which competes with Boeing's MAX. The Toulouse, France-based company plans around midyear to start building 60 of the A320 airliners a month, up from around 52 last year.

It previously said output would rise to 63 of the airliners a month in 2021 and any further increase wouldn't take effect until after that time, new Chief Executive Guillaume Faury said Tuesday.

Boeing has said it would temporarily cut production of the 737 MAX that competes with the A320, to 42 planes a month from 52. The decision came after a fatal crash of a MAX on March 10 -- the second in less than five months -- drove regulators world-wide to ground the fleet. Boeing is working on a fix to the MAX to address safety issues that crash investigators have implicated in both accidents.

Boeing's MAX cutback isn't changing Airbus's production plans in large part because of suppliers' limited capacity, Mr. Faury told reporters. Some suppliers for the A320 also serve Boeing, but he said the overlap is small. "We don't see a relaxation and ease in the supply chain" following Boeing's MAX output adjustment, Airbus's CEO said.

Mr. Faury, who assumed his current position in April after running Airbus's commercial plane operations, wouldn't say whether the company has fielded inquires from MAX customers about buying A320s instead. Demand for the fuel-efficient aircraft was strong before the MAX crisis, he said, and that continues. "We are limited by production for the next years."

Airbus confirmed plans to deliver at least 880 commercial jets this year. Boeing, which had targeted as many as 905 handovers, last week suspended that guidance because of a freeze in 737 MAX deliveries and the cut in output. The 737 is Boeing's largest production program by volume.

Airbus took the industry's top spot for annual plane deliveries for the first time in 2003 after Boeing sharply cut output in response to an economic downturn that hit some travel markets hard. The European plane maker ceded the title back in 2012 when Boeing was increasing deliveries of its 787 Dreamliner planes.

Increased production helped lift Airbus first-quarter adjusted earnings before interest and taxes, stripping out one-time items, to EUR549 million ($614 million) compared with EUR14 million the previous year. Airbus delivered 162 airliners, up from 121 in the year-earlier quarter, driving a 24% increase in sales to EUR12.55 billion.

Net profit for the first quarter fell 86% to EUR40 million, reflecting several program charges and a EUR190 million earnings hit from the German government's suspension of defense export licenses to Saudi Arabia over the Middle East country's military activity in Yemen. Airbus is unable to execute a border-security contract for Saudi Arabia as agreed because of the arms ban, Chief Financial Officer Dominik Asam said.

Higher inventory levels to pave the way for production increases contributed to EUR4.34 billion in free cash outflow before mergers, acquisitions and customer financing in the first quarter. Airbus, which typically generates most of its free cash inflow in the last weeks of the year, stuck to guidance in 2019 for around EUR4 billion in free cash inflow before mergers, acquisitions or customer financing.

Airbus said demand for new planes remained robust despite weak order bookings in the first three months of the year. The company secured 62 new orders in the period while suffering 120 cancellations. The latter were tied in part to the A380 superjumbo, which the company has said it would stop building in 2021.

Airbus took a one-time charge of EUR61 million stemming from its decision in February to shutter the A380 superjumbo program. The last of the double-deckers is due to be delivered in 2021. Airbus, in March, said it had begun talks with unions about the impact of up to 3,500 jobs linked to the A380, mostly in France and Germany.

Corrections & Amplifications The chief executive of Airbus is Guillaume Faury. An earlier version of this article included a photo of Tom Enders, former CEO of Airbus, and wrongly identified him as the current CEO. (April 30)

Write to Robert Wall at robert.wall@wsj.com

 

(END) Dow Jones Newswires

May 01, 2019 02:47 ET (06:47 GMT)

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