Airbus downbeat on recovery outlook as uncertainty persists
CEO Guillaume Faury says ‘pace of recovery depends on the evolution of the pandemic and rate and effectiveness of vaccines’
Paris — Airbus issued cautious guidance on the pace of its recovery from aviation’s worst-ever crisis and said it generated €4.9bn in cash during the fourth quarter.
The European planemaker rode a December flurry of jet deliveries to beat its target to break even for a second straight quarter, based on adjusted free cash flow. Yet jet handovers are forecast to stay at 2020’s depressed levels in 2021, even as Airbus plans to ramp up production in the second half.
The company’s downbeat outlook for 2021 surprised analysts who had expected Airbus to target higher aircraft deliveries after successfully balancing demand with output in the final months of 2020. The assessment reflects uncertainty over when the “tipping point” for a travel rebound will come, CEO Guillaume Faury said on a conference call.
“We can see progress on vaccination campaigns but new variants of the virus are spreading, and at the same time we see reinforced lockdowns,” Faury said. “The pace of recovery will not only depend on the evolution of the pandemic and rate and effectiveness of vaccines, but also the reaction of governments.”
The uncertain outlook confirms Airbus has yet to break free from the Covid-19 crisis that’s pummeled manufacturers and airlines alike for the past year. Air travel remains challenging, with countries tightening borders despite vaccine rollouts. Since January, when the planemaker slowed a plan to increase output, customers have pared back flight schedules and dragged out aircraft deliveries further.
Airbus shares fell as much as 4.6%, and were down 3.4% to €90.67 before the close in Paris.
The Toulouse, France-based company reported earnings before interest and taxes of €1.83bn for the fourth quarter, a 35% drop, as revenue slid 19% to €19.8bn.
Airbus expects jet handovers this year to at least match the 566 delivered in 2020, Faury said. The goal for adjusted free cash flow — which excludes the impact of M&A and customer financing — is break even, while earnings before interest and tax is forecast at €2bn, according to a statement Thursday.
Airbus said in January that output of its top-selling A320-series narrow-body will rise gradually to 45 per month through the fourth quarter. It had previously targeted a faster jump, to 47 monthly by July from the current rate of 40 planes.
Faury told Bloomberg Television that the guidance on deliveries reflects the very uncertain environment and the difficult start to the year. The company could beat these forecasts if the outlook improves, he said.
While case counts are coming down, new virus strains have created uncertainty about the timing of a global travel recovery. Passenger traffic may improve by only 13% in 2021 in a worst-case scenario, the International Air Transport Association said this month. That compares with an official forecast of a 50% rebound issued in December.
The CEO said on the conference call that the company has fewer than 100 undelivered aircraft, including a “small number” of whitetails, or jets without a customer. He reiterated his expectation that the commercial aeroplane market won’t return to pre-Covid levels until sometime between 2023 and 2025.
In the meantime, airlines’ shaky finances will ripple back to Airbus. The planemaker’s cash flows will feel the impact from lower pre-delivery payments from customers, as well as a greater requirement to help finance jet purchases, CFO Dominik Asam said on the call.
The company may be required to finance €1bn or more for its customers, though it hopes export credit programmes will help to fill the gap.
“It’s not our intention to do more than we need to do,” Asam said. “We’re not a bank, we’re an aircraft manufacturer.”
The value of Airbus’s order backlog fell by €98bn to €373bn at year-end, reflecting in part the longer-term damage wrought by the coronavirus pandemic on the health of the aerospace industry.
About 10% of the drop in value is down to cancellations and the coronavirus impact on the backlog, Faury said.
The company relies heavily on the Asia-Pacific region for deliveries, with almost 30% of its order backlog in the region, while another 30% is for European customers and 21% destined for North America.
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