Airbus to step up jet production as profits rise

Airbus announced an increase in jetliner production as it unveiled higher 2013 profits, clouded by cautious forecasts for the coming year and fresh charges for its newest A350 model.

Europe's largest aerospace group, previously known as EADS, said it would raise output of its A320 family of small jets to 46 aircraft a month by the second quarter of 2016 from 42 now, echoing plans by rival Boeing to hit 47 a month by 2017.

Planemakers are producing a passenger plane every few hours after a record surge in demand for latest fuel economies, pointing to rising revenues from mid-decade but putting unprecedented demands on a global network of suppliers.

For 2014, parent Airbus Group forecast flat revenues and “moderate” growth in operating margin, which it still expects to reach 7-8 per cent in 2015 compared with 6 per cent in 2013.

From January 1st, Airbus Group changed its name from EADS and reorganised itself into three divisions by merging its defence and space units alongside the Airbus jet and helicopters units.

It had already reported that its Airbus planemaking subsidiary had beaten its gross order target of 1,200 planes with orders of 1,619 aircraft in 2013, outselling rival Boeing but failing to catch up in terms of jets delivered.

Airbus, which is heavily dependent on recently unsettled emerging markets, said it was assuming “no major disruptions” to the world economy but outlined what some analysts described as lukewarm forecasts for 2014.

It predicted 2014 deliveries in line with those of 2013, meaning it looks set to remain in second place behind Boeing on production this year, and reaffirmed it would deliver its first A350 to Qatar Airways by the end of 2014.

Gross commercial aircraft orders should remain above the level of deliveries and revenue should be stable, it said.

"There is maybe a slight disappointment with 2014 margin guidance but investors will be more focused on next year and 2016," said Societe Generale analyst Zafar Khan.

A Paris trader who asked not to be named, called the outlook “too cautious” and expressed some disappointment in a lower than expected dividend €0.75, up from €0.60 in 2014.

However, several analysts said cashflow was surprisingly strong and noted a more wary European corporate context.

"Given the recent drop in earnings expectations for 2014, we see the 2014 (guidance as) fully in-line," said DZ Bank analyst Markus Turnwald in a note.

Airbus Group shares closed at €53.11 yesterday.

The stock has risen around 49 per cent in the past 12 months, outrunning a 19 per cent gain in French blue-chip shares over the same period. But in the past month it has lagged the French CAC 40 index by giving up 3 per cent.

Airbus Group’s widely watched operating profit before one-off items rose 21 per cent to €3.6 billion in 2013, it said in a statement. Revenue rose 5 per cent to €59.3 billion.

Net profit also rose 22 per cent to €1.5 billion after charges of €434 million related to higher costs on its newest widebody jet, the A350, and €292 million driven mainly by restructuring of defence and space activities.

Analysts were on average expecting group operating profit before one-off items of €3.52 billion on sales of €58.72 billion, according to a Reuters survey. Net profit was seen up 29.5 per cent at €1.59 billion.

The results come two weeks after UK engine maker Rolls-Royce sent shivers through the aerospace sector by warning defence spending cuts would halt its profit growth in 2014.

In January, Boeing posted strong fourth-quarter profits but sent its shares sliding with more cautious-than-expected profit and cashflow forecasts for 2014.

Both Airbus and Boeing have bulging order books as airlines seek fuel savings by placing orders for the latest generation of jets or revamped versions of earlier models, but defence cuts and a chill in emerging markets have dampened the sector.

The Airbus commercial planemaking unit has been hinting at a possible production increase for some months as jetliner demand rides out the recession, but there have been concerns whether an already taut supply chain could keep up.

Airbus said it had carried out a “comprehensive assessment” of its suppliers before taking the decision to produce more.

Reuters