Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Airbus SE (EADSF, Financial) reported a 4% year-on-year increase in H1 2024 revenues, reaching EUR28.8 billion.
- The company secured 327 gross orders for commercial aircraft in the first half of the year, with a backlog of 8,585 aircraft.
- Airbus SE (EADSF) delivered 323 commercial aircraft to 65 customers in H1 2024, showing strong operational performance.
- The company recorded a significant increase in helicopter orders, with 233 net orders compared to 131 in H1 2023.
- Airbus SE (EADSF) has implemented a highly selective bid strategy and redefined internal governance to improve efficiency and profitability.
Negative Points
- The company recorded a EUR989 million charge in its space business due to revised project schedules and cost overruns.
- H1 2024 EBIT adjusted decreased to EUR1.4 billion from EUR2.6 billion in the first half of last year, reflecting challenges in the space business.
- Supply chain issues, particularly with engines and cabin equipment, have impacted short-term production and delivery schedules.
- The company faces continued pressure in the supply chain and a complex economic environment, affecting its ramp-up plans.
- Airbus SE (EADSF) has had to adjust its A320 ramp-up trajectory, delaying the production rate of 75 A320 aircraft per month to 2027.
Q & A Highlights
Q: Could you give us a little bit of color as to what you're actually trying to achieve with the restructuring in the commercial business? Are there any cost savings numbers that you can talk to and what sort of benefit that that's going to have on the margin in the second half of the year?
A: (Thomas Toepfer, CFO) This is not a restructuring program but rather a focus on efficiency and ramp-up. The main areas are ensuring everyone is focused on the ramp-up and maintaining cost control. There are no specific cost savings numbers, but the aim is to help achieve our 2024 targets and improve financial profitability beyond that.
Q: How should we think about headcount from here, given the significant hiring in Q2?
A: (Thomas Toepfer, CFO) We over-hired relative to our plans due to overestimating attrition rates. As of the half-year, we had 154,549 FTEs, including the first-time consolidation of our India business. Stripping that out, the increase is moderate. We are decelerating hiring in 2024 and being very selective to align with our ramp-up targets.
Q: Can you comment on what will drive the implied pre-R&D EBIT for the extra 28 airplanes you will deliver in the second half compared to last year?
A: (Thomas Toepfer, CFO) The bridge for the second half includes a delta of 28 aircraft deliveries and the assumption that space charges will not repeat. The higher R&D costs and inflation will be offset by our improvement program, leading to the EUR0.9 billion uplift required for the second half.
Q: How should we think of your delivery outlook beyond 2024? Is it fair to assume low double-digit delivery growth per annum after this year?
A: (Guillaume Faury, CEO) We don't want to give a precise guidance for 2025, but the number of deliveries to reach rate 75 by 2027 and other targets suggest a trajectory that includes double-digit growth in certain years. Past performance and current investments support this outlook.
Q: What are you aiming for with the funding for the A220? Is it to cover the ramp-up and investments needed?
A: (Thomas Toepfer, CFO) The funding is to support the ramp-up to rate 14 by 2026. It will not have consequences on our consolidated numbers as it replaces shareholder loans with equity injections. This is for the normal ramp-up, not new program developments.
Q: Are you concerned about potential changes in U.S. tariffs, especially on the suspended WTO ruling for 2026?
A: (Guillaume Faury, CEO) Tariffs are less likely now due to balanced WTO rulings and Boeing's recovery. However, tariffs are volatile and could be reintroduced. We have increased flexibility with a stronger U.S. presence, reducing potential impacts.
Q: Can you explain the good performance in Defense & Space margin in Q2 despite the EUR989 million charge?
A: (Thomas Toepfer, CFO) The good margin is due to a positive mix effect towards higher-margin services in Air Power. However, this should not be extrapolated over the next years as margins can vary between services and products.
Q: What drove the good performance in commercial aircraft EBIT?
A: (Thomas Toepfer, CFO) There may be some early positive impacts from our performance initiatives, but the main factors are the same as outlined in our full-year guidance. The improvement program will compensate for inflation and increased R&D costs.
Q: Are issues with small tier two and three suppliers still the case, and what is the path to getting back to normal?
A: (Thomas Toepfer, CFO) The situation has evolved from many small suppliers to a few large suppliers with critical components. The issues are now more targeted, allowing for more focused action plans.
Q: How has the change in delivery outlook affected your production outlook?
A: (Guillaume Faury, CEO) Short-term impacts have led to a revised 2024 guidance. The slower trajectory from 2024 impacts 2025 and beyond, leading to the adjusted rate 75 target for 2027. We are adapting to ensure a manageable ramp-up.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
