TOULOUSE–European plane maker Airbus SE Thursday signaled it was starting to reap the benefits of higher plane production, reporting guidance-beating free cash flow on the back of record plane deliveries and joining rival Boeing Co. in promising to build even more airliners.
Airbus shipped 718 planes in 2017 helping it generate EUR2.95 billion ($3.68 billion) in free cash flow before mergers, acquisitions and customer financing against a target of about EUR1.4 billion, on par with the year-earlier period. The rise signals Airbus is starting to turn higher plane deliveries into stronger cash flow at a time output is rising further.
Airbus said it was raising output to around 800 airliners this year. Airbus already announced plans to boost single-aisle plane production to 60 aircraft a month next year, from around 50 in 2017, and is considering further increases because of strong demand.
Airbus and larger rival Boeing have benefited from a surge in demand for commercial planes. Global economic growth has lifted passenger numbers, filling aircraft, and driving airline appetite for expansion.
The world’s two biggest plane makers have built a backlog of orders stretching ahead for seven years or more on some of their most popular models. Boeing last month said it planned to lift production to 810 to 815 planes this year from 763.
Airbus Chief Executive Tom Enders Thursday said the company’s 2017 earnings “endorse our earnings and cash growth story for the future.”
Airbus’s operating earnings, which strip out some one-time items–such as the charge on the A400M program–were EUR4.25 billion, compared with EUR3.96 billion a year earlier. Net profit rose sharply to EUR2.87 billion. Its year-earlier figure was impacted by a noncash accounting adjustment on currency hedges.
Profit was dented, though, by continued problems on the beleaguered A400M military transport plane where Airbus has been running behind. The company took a EUR1.3 billion charge on A400M against full-year earnings, raising to more than EUR8 billion the combined earnings hits Airbus has suffered on the unprofitable program.
Mr. Enders said a recent agreement with governments to adjust delivery timelines and technical content on the plane “significantly reduce the remaining program risks.”
The Toulouse-based company reported EUR66.8 billion in sales, little changed from a year earlier, with stronger commercial airliner revenue offset by weaker helicopter and defense and space activities.
Boosting plane production hasn’t been without its challenges for Airbus. The company has been struggling with the supply of engines on its popular A320neo plane and that has slowed deliveries. Last week, Airbus said problems with one of the engines, made by United Technologies Corp., were delaying some planes and put a hold on deliveries. Airbus said it was still assessing the impact of the problem on deliveries.
Rival engine supplier CFM International, a joint venture between General Electric Co. and France’s Safran SA, also has been behind schedule on delivering its equipment.
Airbus also is wrestling with other issues. The company faces regulatory probes in multiple jurisdictions, including the U.S., about the improper use of middlemen to win military contracts.
Airbus Thursday said U.S. authorities have asked for information on French and British probes about the use of unauthorized sales agents to win commercial plane deals, widening the scope of the U.S. investigation.
Airbus has warned any financial impact could be “material,” though it was too early to judge what the consequences of the investigations could be.
The investigations caused Airbus, almost two years ago, to lose access to export credit financing support, which can be critical to support deliveries to financially weaker customers. Chief Financial Officer Harald Wilhelm Thursday said that under an agreement with European governments limited customer financing backing would resume this year.
Even so, Airbus forecasts that adjusted earnings this year should increase 20%. Cash generation should be similar this year to 2017, the company said.
Airbus said it planned to increase its dividend 11%.
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