Europe’s Airbus, which has warned its staff it may have to cut thousands of jobs, reported a consolidated first-quarter loss of €481 million (US$521.9 million) compared to last year’s consolidated net income of €43 million in the same quarter a year ago and attributed the disappointing results to the global shutdown of the commercial aviation industry due to the COVID-19 pandemic. The company said consolidated revenues fell to €10.6 billion compared to €12.5 billion in the first quarter a year ago,, “reflecting the difficult market environment impacting the commercial aircraft business with 40 less deliveries than a year earlier, partly offset by a better mix and more favourable foreign exchange environment” The consolidated loss per share was €0.61 compared to a 2019’s first-quarter earnings per share of €0.05.
The loss, when considered in adjusted operating figures, amounted to €281 million (US$304.7 million) as revenues fell 15 percent amid the “gravest crisis the aerospace industry has ever known”, the company said. The aerospace group also reported a negative cashflow of €8.03 billion including a previously published record €3.6 billion fine to settle bribery and corruption charges in Britain, France and the United States.
“We saw a solid start to the year both commercially and industrially but we are quickly seeing the impact of the COVID-19 pandemic coming through in the numbers,” said Airbus Chief Executive Officer Guillaume Faury. “We are now in the midst of the gravest crisis the aerospace industry has ever known. We’re implementing a number of measures to ensure the future of Airbus. We kicked off early by bolstering available liquidity to support financial flexibility. We’re adapting commercial aircraft production rates in line with customer demand and concentrating on cash containment and our longer-term cost structure to ensure we can return to normal operations once the situation improves. At all times, the health and safety of Airbus’ employees is our top priority. Now we need to work as an industry to restore passenger confidence in air travel as we learn to coexist with this pandemic. We’re focused on the resilience of our company to ensure business continuity.”
In a conference call with analysts after the results were released, Faury said the company would continue work on its A320XLR as well as smaller planes like the A220 because he, like most of the rest of the industry, believes that domestic travel will recover faster thand any other segment and the single-aisle A320 is the workhorse of domestic routes in many countries.
He also said he believed the company would be able to make more adjustments to its plans by June because many airline customers are still trying to secure their own futures. “We are talking to our airline customers, we are monitoring their financial health…and we think by June we will know more about the health aspects and effects of the virus on aviation, we will know more data points on the economic impact and the speed of the recovery”, he said.
While not able to say when the world will start to fly again, Faury was upbeat that “people will still want to fly”, adding that Airbus was also working on new technologies to help “decarbonise” the airplane world because “this will continue to be one of the most important things in the 21st century”.
He said China’s market was looking up and said Airbus should be able to make deliveries to the mainland in the second quarter, adding that 19 planes were scheduled to be delivered to China in February but they couldn’t because the “vast majority of cases” were travel restrictions to and from China, not for financial reasons.
“We think our product line-up is the right one with smaller planes like A220, A321 and the A350 are good planes so we have the ability to keep competing…we think we are doing the right things to go through the crisis…prudent in the short term but also believe in the industry even in this downturn,” Faury said.
Download the Airbus Q1 results presentation here.
Airbus also said the financial results included a €245 million charge related to Dassault Aviation financial instruments and a charge of €136 million from the full impairment of a loan to OneWeb, which filed for Chapter 11 bankruptcy proceedings in late March in the US. OneWeb is a satellite communications provider that had grand plans to connect the world’s aircraft with high-speed broadband as well as other users.
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The company said net commercial aircraft orders totalled 290, down 58 from those delivered in the first quarter last year and said its order backlog totalled 7,650 commercial aircraft as of 31 March 2020. Airbus Helicopters booked 54 net orders compared to 66 in the same quarter last year, including 21 H145s, 15 UH-72 Lakotas for the US Army and two Super Pumas. Airbus Defence and Space’s order intake of €1.7 billion included military aircraft-related services, new contract wins in telecommunications and in connected intelligence. Also included is the Phase 1A demonstrator contract for Europe’s Future Combat Air Systems programme.
A total of 122 commercial aircraft were delivered in the first quarter compared to 162 aircraft last year at this time), and were made up of eight A220s, 96 A320s, four A330s and 14 A350s. Airbus Helicopters delivered 47 rotorcraft compared to 46 last year with its 19 percent increase in revenues reflecting the favourable delivery mix and growth in services. Revenues at Airbus Defence and Space were stable year-on-year. One A400M transport aircraft was delivered in the quarter.
The company around 60 aircraft could not be delivered due to the COVID-19 pandemic. As announced in early April, due to the COVID-19 situation average monthly aircraft production rates are being adjusted to 40 for the A320 family, two for the A330 and six for the A350. This represents a reduction of roughly one-third compared to pre-crisis average production rates. On the A220, the Final Assembly Line in Mirabel, Canada, is expected to progressively return to a monthly rate of four aircraft.
Airbus Helicopters’ adjusted earnings rose to €53 million compared to €15 million while adjusted earnings at Airbus Defence and Space decreased to €15 million compared to €101 million in 2019), reflecting the lower business performance, including in Space Systems. Due to the severity of the coronavirus pandemic, the incremental impact on the business is being assessed and the restructuring plan at Defence and Space will be adjusted accordingly.
The company said it was focussing on protecting its financial liquidity and was securing a new credit facility amounting to €15 billion, withdrawing the 2019 dividend proposal and suspending the voluntary top up in pension funding. In addition, a €2.5 billion bond was issued, partially terming out the €15 billion credit facility, and settled on 7 April 2020.
Airbus will continue to “focus on cash preservation and will be reducing cash outflows”, it said. The company is reducing its capital spending for 2020 by around €700 million to around €1.9 billion and is deferring or suspending “activities which are not critical to business continuity and to meeting customer and compliance commitments” The company also reiterated any further market guidance will not be issued because of the impact of the COVID-19 pandemic.
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