- Glitches afflict military transport plane, new wide-body jet
- Company needs huge production surge to meet 2016 profit goal
Airbus Group SE took charges totaling 1.4 billion euros ($1.5 billion) against delays and glitches at two key programs that have left it even more reliant on a second-half production surge to meet annual earnings goals.
The European manufacturer recorded a hit of 1.03 billion euros to fix faulty gearboxes on its A400M military transport, together with a penalty of 385 million euros on the A350 wide-body, deliveries of which have slowed to a trickle amid a shortage of cabin fittings including seats and lavatories.
Chief Executive Officer Tom Enders said Wednesday he’s standing by a full-year target of matching 2015’s earnings figure, though that will now be more of challenge. The situation has been exacerbated by engine issues with the company’s revamped A320 workhorse, meaning a major effort will be required to get delayed planes to customers so that final payments can be booked in time.
On the A400M, Airbus’s engine partner devised an interim fix for the gearbox allowing a bigger gap between inspections, but is still working on a long-term solution that could incur further costs and may also have to compensate customers who are having to wait for planes, Enders said on a conference call.
The Toulouse, France-based company faces “a sprint finish” to achieve its full-year goals, Sandy Morris, a London-based analyst at Jefferies International, said in an investor note, though with many of the delayed planes built and awaiting final finishing -- among them 20 A320neos -- it could still get there.
Earnings before interest, tax and one-time items, a figure that strips out the charges, slipped 4 percent to 1.18 billion euros in the second quarter, better than the 1.05 billion euros predicted by analysts. For the full year the company is chasing adjusted Ebit of 4.1 billion euros.
Shares of Airbus were trading 5.3 percent higher at 54.46 euros as of 11:23 a.m. in Paris, paring their decline this year to 12 percent and valuing the business at 42 billion euros.
Airbus’s main jetliner arm delivered 298 planes in the first half out of the 650 it aims to hand over in the full year. That included just 12 A350s from an envisaged 12-month total of 50 as interiors suppliers including Zodiac SA struggles to keep up with build rates for the group’s newest wide-body.
The New Engine Option upgrade to the A320 has managed only eight deliveries to date following cooling issues with the Pratt & Whitney turbines powering the first planes. Qatar Airways Ltd., due to be the first customer, refused to take the model.
Most disappointing for Airbus will be the recurrence of problems with the A400M, a plane dogged by delays and engine problems for years which Enders has called a “never ending saga.” The gearbox glitch could require further charges as engineers work on the fix, he said in the briefing.