(BFM Bourse) – As the end of the year looms, the aircraft manufacturer will have to step up its efforts to keep its target of 700 aircraft battered by the group’s tensions in its supply chain. However, a slight failure would not be prohibitive on the stock market.
“There is no point in running, you have to start on time”. Airbus has often adopted the moral of the fable of the hare and tortoise by Jean de la Fontaine.
Each year, the aeronautics and defense group gives the market an aircraft delivery target for the current financial year. An important target since most of the payment for an aircraft occurs when the customer receives his aircraft in good and due form. And that the generation of industrial cash remains the most watched parameter by the market.
Especially since the group recently confirmed that it was considering an exceptional return to shareholders when its net cash position exceeds 10 billion euros. At the end of September, it amounted to 8 billion euros.
Often, the aeronautics and defense group must go into overdrive at the end of the year to meet its commitments. This was particularly the case in 2018, 2019 and last year.
A whirlwind end to the year
The 2022 vintage is no exception to the rule. The group is currently carrying out a delicate exercise to gradually ramp up its production, while its “supply chain” has emerged from a period of hibernation during the health crisis and is now faced with tensions due in particular to the conflict in Ukraine. . The group, for example, accused of difficulties in terms of its engine supplies.
“We have problems everywhere,” said executive chairman Guillaume Faury at the end of October, who nevertheless judged that the situation had “stopped deteriorating”. For 2022, Airbus expects to deliver 700 aircraft, a target that had been lowered slightly at the end of July, since the company was previously counting on around 720 aircraft.
At its last point of activity at the end of October, the group had delivered nearly 500 aircraft since the start of the year, against 363 for its great rival Boeing. The calculation is therefore simple: the manufacturer must reach an average rate of more than 100 aircraft over the last two months of 2022 to get into the nails.
However, the month of November is likely to be below this average. According to data from the Cirium company and the aibfamiliy.flights site, cited Monday by Jefferies, the group would have delivered over the period from November 1 to 27 only 43 planes. However, Jefferies points out that these statistics still underestimate the actual number of deliveries. “It is not uncommon to see Airbus deliver 5 to 6 aircraft a day in [les] last days” of the month, also recalls Deutsche Bank.
A record of nearly 140 aircraft in December 2019
Airbus knows how to surpass itself in December, having reached a record of 138 deliveries in the last month of the year, in 2019. A year where the tensions on the “supply chain” were not however as acute as in 2022. ” It’s hard to see them reaching 700 deliveries,” a senior supply chain source told Reuters earlier this week.
“The situation on the most difficult components to obtain to finalize the construction of the aircraft has improved. But now Airbus must redouble its efforts to complete the manufacture of the aircraft on which certain parts were missing and which are awaiting delivery. In particular, they extend the work slots over the weekend to achieve this”, explains Romain Pierredon, analyst at the independent research office AlphaValue.
Sometimes it is enough for a tiny component to be missing for an almost completed aircraft not to be delivered to its customer.
“Difficult but doable”
Can Airbus therefore hold its target? “Difficult but doable”, summarizes Deutsche Bank in a note published on Tuesday, the German bank counting on 74 devices delivered in November then 129 in December.
Jefferies considers that the group could have delivered only 65 devices in November. The group would therefore have to equal its 2019 record in December to meet its annual objective. “Deliver 700 devices [sur 2022, NDLR] therefore seems increasingly difficult for Airbus”, writes the design office.
“The target of 700 aircraft remains difficult to achieve. Airbus will have to fuel to achieve it. I am not confident about this target because the group risks running out of time by the end of the year to achieve it. Even if the tensions on the ‘supply chain’ have improved, they remain important”, slice Romain Pierredon.
According to sources quoted by Reuters on Friday, the group would have delivered only 563 planes between January and November. Contacted by BFM Bourse, the European group recalled that it did not comment on speculation about its objectives.
The aircraft manufacturer should publish the November deliveries around the middle of the coming week, after the market closes, according to its habits. This publication will obviously be closely followed by investors.
What about 2023?
Still, not achieving the objective for a few planes would not be enough to call into question the promising trajectory of the aircraft manufacturer, a value overwhelmingly recommended for purchase by design offices. “If they miss 10 planes, no one will react, but if they miss 20, it will show that things are not going as they should,” said Sash Tusa, an analyst at Agency Partners polled by Reuters.
“Certainly, not meeting the annual delivery target could weigh very temporarily on the title, because it amounts to pushing back part of the generation of cash flow”, judge Romain Pierredon.
“Nevertheless, with the probable normalization of the problems on the supply chain, a catch-up effect could be observed next year which means that in the end the impact would be neutral. There could also be an excellent dynamic in 2023 on deliveries”, he nuances.
“Investors who position themselves on Airbus do not speculate but position themselves in the long term on the action. On this logic, a small deviation from the 2022 delivery target would not change much”, insists Romain Pierredon.
All the more so as if the offer remains the main subject for Airbus, on the demand side, the prospects are radiant. Especially since the group benefits from the versatility of its flagship range, the A320 neo family, compared to the 737 Max of its great rival Boeing.
“Demand remains exceptional for Airbus. Their backlog provides them with 10 years of sales and long-term trends are heading in their direction with long-term air traffic growth of 3% to 4% per year and a strong need for airlines to renew their fleets towards less carbon-emitting aircraft. Thus about half of the demand for aircraft will come from traffic growth and about the other half from replacements”, explains Romain Pierredon.
Enough to encourage investors to plan beyond 2022, especially towards next year. Airbus will deliver its forecasts as usual when publishing its annual results in February. Deutsche Bank would be “surprised” if the group gives a figure lower than “800-820” aircraft deliveries.
Julien Marion – ©2022 BFM Bourse
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