Airbus Posts Profit Rise, Takes A400M Charge

July 31, 2015

Airbus Group surprised investors with a strong second-quarter rise in earnings, as airliner deliveries outshone more bad news for the A400M military transporter.

Quarterly operating profit before one-off items jumped 15 percent to EUR€1.23 billion, with gains of at least 20 percent in airliner and helicopter profits masking a EUR€159 million loss in military and space.

First half operating profit before one-offs was EUR€1.88 billion, up 6 percent on revenue of EUR€28.89 billion, also up 6 percent.

Chief executive Tom Enders said Airbus was focusing on the execution of aircraft models such as the A350 passenger jet and the troubled A400M military plane.

Cumulative provisions on the A400M topped EUR€5 billion (USD$5.47 billion) as Airbus took a fresh charge of EUR€290 million on new development delays following the crash of an A400M during a test flight in May.

Airbus said the crash had caused setbacks for the delivery schedule that were still being assessed, while low inflation had also pushed a system for price adjustments into the red.

Airbus has told buyer nations that not all the systems for protecting the plane from external threats and other military features will be available when they are needed, and in some cases not at all.

Airbus aims to deliver up to 17 of the troop and cargo carriers in 2015.

COMMERCIAL MOMENTUM

After delays to the A400M and A380, Airbus has overhauled the way it develops aircraft and those efforts are paying off for its newest commercial model, the A350.

Airbus said the increase in A350 production was "gaining traction" and reiterated the updated A320neo would be delivered this year. Flight tests resumed this week with Pratt & Whitney engines, following a recent technical halt.

Airbus plans to decide by year-end whether to further increase production of the A320 family, the source of most of its cash for other projects.

"The momentum of commercial aircraft is still clearly there," Enders said.

Also lifting sentiment was an improvement in the company's currency hedging book that has seen it unable to benefit significantly from a strong dollar until about 2018.

Airbus Group booked a EUR€748 million gain from the sale of an 18.75 percent stake in Dassault Aviation and said it would sell its remaining 23.4 percent by the end of 2016.

(Reuters)