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Airbus climbs most in nearly 10 years on engine fixes

Company ended 2017 with a record order backlog and delivered more jets than ever before

Gulf News

London: Airbus SE promised 20 per cent earnings growth this year — pushing the stock up the most since 2008 — so long as it can iron out persistent manufacturing problems on two key aircraft programmes.

The European planemaker ended 2017 with a record order backlog and delivered more jets than ever before. The shares advanced as much as 10 per cent after the Toulouse, France-based company assured investors on Thursday that it can top last year’s output and build 800 aircraft despite the engine issues that have slowed production of its top-selling A320neo short-haul jet.

Airbus’ struggles with the narrow-body model and the A400M military transport plane have at times overshadowed the benefits of a surge in commercial aircraft sales. Chief Executive Officer Tom Enders said in a statement that the company is working on measures to gain control over both problem programmes.

“The A320neo ramp-up remains challenging and requires that the engine suppliers deliver in line with commitments,” Enders said, adding that the impact on deliveries of the latest turbine issues is under assessment.

A 1.3 billion-euro ($1.6 billion, Dh5.9 billion) charge against the A400M, which takes total cost-overruns on the programme beyond 8 billion euros, is meant to draw a line under the losses. Airbus last week reached a deal with customer nations to help secure the turboprop programme, though Enders told Bloomberg TV he can’t guarantee that there’ll be no more hits, saying: “You never can put your hand into the fire and say this is it once and for all.”

Earnings before interest, tax and one-time items increased 8 per cent in 2017 to 4.25 billion euros, the planemaker said. Analysts had predicted a profit of 3.99 billion euros, the average of 13 estimates.

The shares advanced almost 11 per cent. They were trading 10 per cent higher at to 92.99 euros as of 12.11 pm in Paris.

Airbus’ A400M charge concerns revisions to the plane’s delivery schedule and capabilities, together with the retrofit of examples already delivered, the company said. At the same time, it has been blindsided by yet another flaw with Pratt & Whitney engines that power the A320neo.

‘Not rocket science’

The latest issue, which emerged last week, relates to a seal that Pratt replaced after an earlier version exhibited durability issues. Fixing the glitch is “not rocket science,” the CEO said in the TV interview, adding that the US company appears to have identified the root cause and that deliveries of modified engines should start from April.

A320neos equipped with a rival power plant made by the CFM International alliance of General Electric Co. and France’s Safran SA are also behind schedule, due to less serious “maturity” concerns, the planemaker said. It will still look at raising build rates to 70 jets a month from the 60 planned.

“We’re expecting to deliver another record number of deliveries in 2018,” Enders said on a conference call. “Of course we need engines for these aircraft, but I am confident our partners will not let us down.”

Airbus appears to be gaining control over the A350 wide-body programme, where initial handovers were held up by issues with seats and fittings. A $16-billion order for the A380 superjumbo from Emirates will meanwhile sustain production for years, it said.

A deal with European governments to pare repayments of launch aid will also bolster the slow-selling jet, Enders said.