The Wall Street Journal
By Alex Frangos
Updated February 15, 2018 9:46 a.m. ET
It sure is nice when your plane comes in early. For Airbus shareholders, it is something that could in theory happen more often.
Airbus results published Thursday restored some faith in the airplane making giant and its ability to become a cash flow machine—though it remains well behind arch rival Boeing in that regard. Airbus’s measure of free cash flow, closely watched by investors, was more than €6.2 billion in the fourth quarter, handily beating analysts expectations. It boosted its dividend and gave a bullish outlook for the current year. The stock rose more than 10%.
The results reinforce that the company, with more than 7,000 planes on back order, is mostly an execution story. So long as it churns out planes with increasing frequency, while picking up efficiency gains along the way, more cash will follow. Management said it aims to deliver around 800 commercial airplanes in 2018, up from 718 last year.
Helping matters along, Airbus isn’t in the midst of developing any new planes. Research and development costs, for instance, are down nearly 20% in the past two years. Its last new airplane model, the long-haul A350, is well along its product cycle without major hiccups.
There are clear overhangs on Airbus. Chief Executive Tom Enders is meant to step down next year and there is natural anxiety over whether the replacement will be the best person for the job or someone who is politically palatable to Airbus’s French and German government shareholders. A new sales chief was recently installed. The military transporter A400 project continues to generate write-downs. And investigations into past sales practices could result in hefty fines down the road, the company has warned.
Even if some of these generate bumps down the road, it won’t matter much as long as planes roll out the door and cash rolls in.
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