Airbus profit soars on higher output of rival to Boeing Max

Bloomberg

Airbus SE earnings surged in the second quarter, helped by a ramp up in deliveries of a narrow-body model that rivals Boeing Co’s grounded 737 Max.
Adjusted profit before interest and tax increased 72 percent to $2.2 billion, beating estimates, as Airbus handed over close to 300 of the A320 planes. Four-fifths of the jets were the revamped Neo version, according to a statement.
Airbus reiterated full-year guidance for up to 890 aircraft deliveries, a 15 percent gain in Ebit and about 4 billion euros of free cash flow. The shares rose 2.2 percent and traded up 0.7 percent in Paris, with Jefferies International analyst Sandy Morris saying 2019 earnings could come in higher than expected based on the second-quarter performance.
“We figure Airbus could have raised guidance today, but chose not to with so many deliveries remaining in the second half,” Morris said in an investor note. Margins are being spurred by higher prices for Neo planes versus earlier A320 models, and improved financial performance on the A350 wide-body programme.

A321 Concern
The acceleration of build rates comes after narrow-body deliveries were held back by a series of snags. Airlines including IAG SA and JetBlue Airways Corp complained that some A320-family shipments are still behind schedule, especially concerning a new long-range variant of the A321 model.
Airbus said it’s studying how it can lift production of the A321 after the launch of an even further flying version designed to head off an all-new aircraft design from Boeing. That could include converting floor space at a Hamburg plant that builds the A380 model set to be wound down over the next two years, Chief Executive Officer Guillaume Faury said on a call.
Talks are also continuing with engine manufacturers on increasing narrow-body build rates beyond the 63 a month targeted for2021.
A decision is likely in the second half, Faury said.
Net orders for the first half totalled 88 planes. Even with the signoff of further deals announced at the Paris Air Show, the year is looking lackluster for new business. That may indicate a possible downturn in the aerospace cycle, though with record backlogs Airbus is already guaranteed several years of work.
Airbus also warned that any US decision to impose tariffs on its products in a dispute over government subsidies would weigh “significantly” on deliveries of aircraft and helicopters to American customers.
The European Union may decide to retaliate, but only at a later stage, Airbus said, adding that it continues to support a negotiated solution.
Shares of the Toulouse, France-based planemaker have surged 53 percent this year, giving it a market value of 100 billion euros.
Boeing has gained 7.7percentas it grapples with the crisis surrounding the Max following two fatal crashes involving the jet in less than five months.