Airbus cuts cash outflow and confirms jet programmes on track

Airbus cut its cash outflow significantly in the first quarter and signalled that its challenging production programmes were under control, reinforcing investor expectations of a share buyback later this year.

Harald Wilhelm, finance director, said the European aircraft group was "progressing well operationally and strategically".

Airbus expected to meet its targets of higher sales, deliveries and orders this year. Earnings were also expected to increase slightly in 2015, and the group aimed to return to a neutral cash flow situation by the year end.

Airbus said earlier this year that it would review its capital allocation, addressing investor demands for better returns after years of heavy investment and cost overruns.

Mr Wilhelm said a decision on a share buyback would be taken in the autumn, once it could be shown that acceleration of production on new aircraft programmes continued on track and the planned disposals in the defence and space arm were confirmed.

Airbus also intended later this year to sell yet more of its shares in Dassault Aviation, the French business jet and military aerospace group in which it has been a strategic shareholder on behalf of the French government for many years.

Airbus faces a considerable challenge in ramping up production of its A350 widebody aircraft, the first of which was delivered late last year to Qatar Airways, while it is also making higher numbers of its popular single aisle A320. Mr Wilhelm said costs were under control and the programmes were on track industrially.

Sales in the first quarter were lower - at €12.1bn against €12.6bn in the same period last year - but this was due to the phasing of deliveries, which he said, which were backloaded to the end of this year.

Underlying free cash flow - which excludes the €700m disposal of shares in Dassault - improved from an outflow of €2bn to a negative €1.1bn in the quarter.

Reported earnings before interest and tax, of €1.2bn, were up 73 per cent from a year ago, boosted by the one-off gain of the sale in the family-controlled French company that makes the Rafale fighter jet.

Excluding one-off gains and charges, ebit fell from €700m to €651m in the first quarter partly because of a lower than expected contribution from Dassault Aviation. The commercial aircraft division which accounts for the bulk of the business saw equivalent ebit rise from €527m to €569m, driven by operational improvements and a favourable phasing of cost.

Nick Cunningham, aerospace analyst with Agency Partners, said the first quarter "did not bring too many surprises". While margins in the commercial aircraft division before one-offs were better than expected, it was unclear what the use of provisions had been against the delivery of an "undoubtedly very high unit cost" A350 delivery.

Mr Wilhelm sought to reassure the market that costs were coming down on the aircraft as more moved into the assembly line.

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