Airbus hits markets turbulence as profits slump

28th April 2016, Comments 0 comments

Airbus Group shares descended steeply Thursday as the aeronautics giant revealed a 50-percent plunge in net profits, delays in new commercial plane deliveries and fresh engine problems with its troubled A400M military transport plane.

The European group admitted that it faces a testing start to 2016 but stuck by its forecasts for profits for the full year, saying it expects much of the money to be rolling in towards the end of the year.

"2016 turns out to be the challenging year we anticipated," said chief executive Tom Enders.

"In a nutshell, despite these challenges we maintain our 2016 guidance and also our earnings and cash growth story for the coming years," he said in a statement, stressing that Airbus still has strong orders for commercial planes and it expects to ramp up aircraft production.

Airbus said net profit dived 50 percent from a year earlier to 399 million euros ($453 million) in the first three months of the year.

Sales held steady, unchanged at 12.2 billion euros.

The news had investors strapping in their seatbelts for a rough ride, as Airbus stocks dropped 6.0 percent to 54.93 euros in early trade on the Paris stock exchange.

Airbus said it was suffering temporary supply chain problems with the narrowbody A320. For the A320 NEO (new engine option), Airbus said Pratt & Whitney had promised to deliver engines for aircraft delivery from mid-2016, meaning production can accelerate in the second half of the year.

The group also reported supply chain bottlenecks with its A350 XWB long-range, twin-engine jet as it tries to reduce outstanding work and control recurring costs while ramping up production. "This is increasingly challenging," the group said, nevertheless maintaining its target of rolling out 10 A350s every month by the end of 2018.

Adding to the complexities, Enders said Airbus faced a "serious challenge" for production and customer deliveries of the A400M military transport plane because of a problem discovered in the propeller gearbox.

"It's very frustrating but we'll have to work through this with our engine partners," he said.

Airbus said the final cost of the A400M engine woes, including the technical, commercial and industrial implications, was hard to judge for now but its potential impact on Airbus finances "could be significant".

The group maintained its overall forecast for 650 aircraft deliveries in 2016.

© 2016 AFP

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