Airbus, Boeing Chase Follow Own Paths to Further Growth
October 26 2016 - 03:49PM
Dow Jones News
By Doug Cameron and Robert Wall
The world's two largest plane makers laid out divergent goals
Wednesday as Boeing Co. chases fresh sales while Airbus Group SE
needs to push more jets out of its factories.
Both companies are under pressure from investors fretting about
the resilience of combined order books totaling 10,000 jets and
valued at more than $1.5 trillion, though few deals have been
canceled.
Boeing Chief Executive Dennis Muilenburg said the company, which
reported forecast-beating third-quarter profit, is still committed
to its goal of boosting margins to around 15% by the end of the
decade from around 10% now.
But it needs to find fresh deals for its widebody jets,
especially the 777. Sales of twin-aisle planes that typically have
higher profit margins have been sluggish this year as airlines in
Asia and the Middle East dialed back on expansion plans.
Boeing has won fresh orders for just 26 of its existing 777 jets
this year to push the backlog over 150.
Mr. Muilenburg said 777 output could be cut to 42 a year in 2018
after already announcing a trim to 66, unless it closes some key
sales campaigns in the next two months. It currently makes 100 a
year. A decision on boosting production of the smaller 787 jet
hinges on gaining additional deals in the next six months, he
said.
The profitability of both jets is crucial to Boeing's long-term
plan and the company still expects to generate around $10 billion
in cash in 2016 and increase this in later years, Mr. Muilenburg
said.
Boeing shares reversed an early loss Wednesday and were recently
up 4.1% at $144.78 after hitting their highest level this year.
Deals for single-aisle jets have been far more robust. Boeing
still plans to boost output of the 737, and demand outstrips even
the peak of the 57 planes a month it expects to build in 2019, Mr.
Muilenburg said.
Meanwhile, production at Toulouse, France-based Airbus has been
hobbled by delays in securing seats and engines for some jets. The
company needs to overcome these to deliver on pledges to
investors.
Airbus on Wednesday said it would push more than 208 planes out
the door in the fourth quarter, an unusually large number,
including almost doubling delivery of its new A350 long-range jet.
To meet its profit goals, Airbus plans to ship more than 670
jetliners this year, at least 20 more than initially promised.
Boeing aims to deliver as many as 750 planes in total this year
Airbus needs to get those planes into customer hands to generate
more than 5 billion euros (about $5.5 billion) in cash in the last
three months of the year. It has committed to generated generate
about EUR1.2 billion in cash this year and ended the third quarter
with about EUR4.7 billion in cash out the door.
"For the remaining months of the year we remain totally focused
on deliveries to achieve our earnings and cash guidance," said
Airbus Chief Executive Tom Enders.
Airbus investors have been anxious that delays on the A350 and
an updated version of the company's popular single-aisle plane,
called the A320neo, would cause earnings to fall short.
The company reported a 21% drop in its closely watched adjusted
earnings measure to EUR731 million. Net income in the period
plummeted 87%, to EUR50 million from EUR736 million, which Airbus
attributed to a higher effective tax rate.
Airbus shares rose 3.8% to EUR55.40.
Boeing's third-quarter profit rose to $2.28 billion from $1.7
billion, with per-share earnings climbing to $3.60 from $2.47. A
tax gain outweighed a charge on a space taxi being developed for
the National Aeronautics and Space Administration. Revenue slipped
7.5% to $23.9 billion, and though Boeing boosted its full-year
guidance slightly, sales are expected to be flat or slightly down
in 2017.
Write to Doug Cameron at doug.cameron@wsj.com and Robert Wall at
robert.wall@wsj.com
(END) Dow Jones Newswires
October 26, 2016 15:34 ET (19:34 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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