Airbus Group SE said it plans to increase production of its best-selling A320 single-aisle jet to 60 a month to keep up with booming demand that helped propel a 12 percent earnings increase in the third quarter.
The company’s plane-making division, which contributes about three quarters of revenue, now builds A320 models at a rate just above 42 a month and had previously planned to boost the figure to 50 by early 2017. The goal exceeds rival Boeing Co.’s own target of 52 single-aisle 737s. Airbus said it will build an additional production line for the planes in Hamburg to accommodate the higher build rate. Shares rose to their highest level since August.
The move to go to 60 a month by the middle of 2019, announced on Friday as the company reported earnings, comes as Airbus races to increase production on its new twin-aisle A350. The planemaker plans to deliver 15 A350s this year, and more than double the figure in 2016, reaching 10 a month by 2018. The company is also developing a new variant of its smaller, twin-aisle A330 with new engines. Airbus stock rose as much as 4.1 percent to 63.19 euros and was up 3 percent at 9:20 a.m. in Paris.
“The healthy commercial aircraft market, robustness of our backlog and supply chain capability allows us to raise the single-aisle production rate,” Airbus Group Chief Executive Tom Enders said.
A380 Demand
Booming demand for A320 planes from low-cost operators around the world stands in marked contrast to demand for Airbus’s largest plane, the 550-seat superjumbo A380. It’s been three years since the planemaker won a new airline customer for the plane and the backlog is dwindling.
Airbus has said it can break even on building the A380 at a level of just under 30 planes a year, and expects to achieve breakeven in 2015 and 2016. For 2017, however, Airbus Group Chief Financial Officer Harald Wilhelm said on a conference call today that the planemaker had between 20 and 30 planes in the backlog, and that it would try its best to break even in 2017.
Earnings before interest, tax, goodwill impairment and exceptionals rose to 921 million euros for the third quarter from 821 million euros a year earlier, Toulouse, France-based Airbus said in a statement Friday. The figure beat an average forecast by seven analysts for 774.6 million euros. Sales rose to 14.07 billion euros from 13.3 billion euros.
Share Buyback
Airbus also said it will buy back and cancel shares worth 1 billion euros by mid 2016. That represents approximately 2 percent of the total market value of the company.
The challenge for Airbus to reach a rate of 60 planes a month, a record output for any model ever built by a planemaker, is to ensure that suppliers can keep pace. Airbus has seen resistance from some manufacturers, including Safran SA and General Electric Co., whose CFM International joint venture is one of two engine suppliers for the A320neo.
The Neo with more efficient powerplants is just going into production now, with plans to certify the plane and begin delivery in the fourth quarter, even after Airbus acknowledged several test disruptions with the model powered by the competing Pratt & Whitney engines.
“Investors will want to see exactly how they plan that ramp-up, and to what extent Airbus will be delivering more planes in 2017 and 2018,” said Yan Derocles, an analyst at Oddo Securities in Paris who has a “buy” rating on the shares. While the earnings beat consensus estimates, the figure for the buyback was somewhat less than investors had hoped for, Derocles said.
Airbus stuck to its full-year guidance, predicting “slightly” higher deliveries this year, and growth in the order book for commercial aircraft. Sales and operating profit before some items, as well as earnings per share and the dividend will also rise, it said.
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