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Airbus to boost output as outlook brightens

Airbus to boost output as outlook brightens
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First Published: Fri, Jul 30 2010. 02 46 PM IST
Updated: Fri, Jul 30 2010. 02 46 PM IST
Paris: Airbus parent EADS made sweeping increases in its financial forecasts on Thursday and pledged to increase jetliner production after a spate of new orders raised hopes of an end to a steep industry recession.
The move by the world’s largest civil planemaker comes as rival Boeing also considers whether to increase output of popular models, though the US company has said it is not yet certain whether the network of suppliers is ready for it.
Airbus said it would increase its production of A320 narrow-body planes in several stages from 34 a month at present to 40 a month by the first quarter of 2012.
Planemakers bagged orders by the dozen at last week’s Farnborough Airshow, especially from leasing companies whose speculative decisions often anticipate the economic mood.
EADS finance director Hans Peter Ring said the industry was more confident after a two-year downturn as airlines in emerging markets also step up to buy, but that major economies like the United States were yet to stage a clear-cut recovery.
“Where we were cautiously optimistic we could say we are optimistic, but we still have to be vigilant,” he said.
The aviation sector is already bubbling, however, and Europeans are cashing in on a weaker euro which helps them to export — even though EADS is paying a short-term price for hedging decisions it took when the currency was stronger.
“Airline yields have recovered, the dollar is stronger and the financial sector has stabilised, so all of that goes in the right direction,” Ring told reporters on a conference call.
Shares in EADS rose as much as 5%, making it the second-biggest gainer among French blue chips. At 0824 GMT they were up 2.7% at €18.065.
Strong backlog
Investors shrugged off a drop in the company’s mid-year profits after it raised both financial and industrial forecasts. The company had previously been criticised for being over-cautious in its forecasts following the first quarter.
EADS predicted 500 Airbus plane deliveries this year, edging past last year’s record of 498 aircraft, and upped its forecast for new jetliner orders by a third to more than 400 this year after bumper orders at Farnborough and a Berlin show in June.
Boeing is targeting 460-465 deliveries.
However, deliveries at Airbus sister firm Eurocopter are likely to fall slightly this year and civil helicopter orders remain slack. EADS is also still worried about costs on the Airbus A380 superjumbo, which is recovering from lengthy delays.
The firm raised its annual revenue forecast to €44 billion after previously aiming to match last year’s €42.8 billion, and predicted €1.2 billion in core profit before one-offs.
It improved a cash target but left its forecast for reported operating profit unchanged at €1 billion.
EADS profits halved in the first half due to weaker hedge rates and more research on new projects. Sales rose 1%.
Widely watched operating profit before one-off items fell to €0.6 billion from €1.3 billion a year earlier.
Boeing is targeting a total of 460-465 deliveries this year. Last month it announced plans to increase production rates on the popular 737 narrow-body jet to 35 a month in early 2012.
But a “question mark” lingers over whether the aircraft supply chain can support increased aerospace output, the head of Boeing’s commercial unit said last week.
Problems in the supply chain have been partly blamed for delays in developing Boeing’s new 787 Dreamliner.
Boeing chief executive James McNerney told investors this week he was targeting a production decision in the early autumn.
Both planemakers, who have a duopoly over sales of jetliners with more than 100 seats, are meanwhile considering whether to upgrade their most-sold lines of aircraft with new engines.
Boeing this week reported higher-than-expected second-quarter profit but saw its shares slip as revenues fell short of estimates.
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First Published: Fri, Jul 30 2010. 02 46 PM IST