AIR Airbus SE

By Benjamin Katz 

Airbus SE said it expects to come out of the coronavirus pandemic in a stronger competitive position than its rival Boeing Co., as it balances navigating a sharp drop in jetliner demand with positioning itself to go on the offensive once the crisis eases.

Airbus, which eclipsed Boeing last year as the world's biggest plane maker by deliveries, said its focus now is cash preservation, as airline customers defer and cancel orders. The company's ability to deliver planes is also complicated by global travel restrictions enacted to curb the pandemic. Airlines typically pay most of the purchase price for new jets when they are delivered.

Airbus said it burned through EUR4.4 billion ($4.78 billion) in free cash flow in the first quarter. That excludes a separate, EUR3.6 billion fine Airbus paid in the first quarter after it settled U.S., French and British allegations of corruption.

Airbus posted a net loss of EUR481 million in the period, compared with net income of EUR40 million in the year-ago quarter. Revenue fell 15% to EUR10.6 billion

Despite the large cash drain, Airbus slightly beat analysts' expectations. Shares were up about 1% in midday European trading.

Airbus' cash situation will get worse in the current quarter, Chief Executive Guillaume Faury said. Deliveries are likely to only start recovering after the summer. Airbus said it would reassess its production rates in June after already slashing output by about a third. The company said any further reductions would be to a lesser extent than those already undertaken.

Airbus is also using the crisis to "right size" the business, Mr. Faury said. In the short-term, that includes plans to scrap all nonessential activities and furlough more staff in Germany and France. It is also undergoing a wider-ranging review of its fixed costs to position itself for a post-pandemic era.

Airbus said it likely won't require a bail out from European governments and pointed to a number of factors that could boost it against Boeing when airlines begin to see a recovery.

"We think our capacity to compete and be strong on the long term is intact, if not improved, as the impact of Covid-19 on our main competitor, on top of the previous difficult situations they had to manage is probably making us stronger," Mr. Faury said. "I want to remain very prudent on this."

First among Airbus' potential advantages is its A320 family of jets -- a single-aisle rival to the Boeing 737 MAX. The two jets once competed fiercely for orders from airlines, which prized their fuel efficiency and flexible range.

Boeing grounded the 737 MAX last year after two fatal accidents blamed on problems with its flight control system. The recertification of the aircraft isn't expected until at least late summer, The Wall Street Journal previously reported.

Mr. Faury said he expects sales of narrow-body aircraft to rebound first, with domestic and short-haul routes recovering before longer connections. Airline executives are also leaning toward smaller planes, which they can more easily fill in a time of depressed demand, he said.

Airbus is also now able to offer an even smaller plane, the A220, after it bought out the program from Bombardier Inc. in February, just before the coronavirus outbreak hammered Europe and started shutting down travel across the Western world.

Airbus' original joint venture with Bombardier set in motion a similar proposed tie up between Boeing and Brazilian jet maker Embraer SA. Embraer produces a rival to the A220. But Boeing walked away from completing that deal over the weekend.

Mr. Faury said Airbus has established a task force to monitor its supply chain to track companies that may fall into bankruptcy. He added that the main risks are for those manufacturers that "entered the crisis in a weak position," particularly those already suffering from the MAX grounding.

"Suppliers that were already impacted by the 737 MAX grounding and stop of production are obviously high on our screen," Mr. Faury said.

Write to Benjamin Katz at ben.katz@wsj.com

(END) Dow Jones Newswires

April 29, 2020 06:56 ET (10:56 GMT)

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