Summary

Just as parent company EADS recently reported improved 2Q YoY figures belying an overall negative first half , so commercial-aircraft division Airbus, while touting "sound financial management" (EADS ceo Gallois), was unable to avoid a huge 27% EBIT drop YoY on just a 1% drop in Earnings. That's disciplined financial management? Hate to see what a free-for-all would look like,,,

Analysis

In the first six months of 2008, Airbus delivered and was paid for 245 commercial aircraft, comprising seven A318s, 51 A319s, 109 A320s and 34 A321s, for a total narrowbody output of 201 aircraft at an average monthly output of 33.5 aircraft (Airbus claims 36). On top of this, Airbus also delivered and was paid for 35 A330s, five A340s and four A380s, giving a widebody output of 7.3 aircraft /month (Airbus claims 8.5), for a grand total of 245 aircraft delivered in 1H08.
 
Contrast this with the first half of 2009: 25 A319s, 165 A320s and 16 A321s, for a narrowbody total of 206 aircraft, at an average monthly output of 34.3, not 36) added to which are the widebodies: 38 A330s, five A340s and four A380s, giving a widebody delivery rate of 7.8 aircraft /month (not 8.5), for a total output of 253 aircraft.
 
So how come the big Airbus EBIT collapse? A400 charges, in a nutshell.
 
Analyzing these raw figures (which are original Airbus data) gives a good indication of output and since OEMs are paid something like 75% of deal price on delivery, they're a good indicator of what levels of revenue Airbus can be expecting to book in any given fiscal.
 
Bu there's even more to it than it. After a considerable amount of deeper analysis by our team here and in the UK, taking into account historical comparisons between list and known deal prices and taking also into consideration Airbus' wanton disregard for commercial revenue generation at the expense of market-share grabbing, a different set of figures emerges, albeit still based on the original Airbus prices but factoring in Airbus' well-known propensity (of which I have first-hand experience) for extensive deal and package discounts and horse-trading.
 
Airbus discounts are widely known on golf courses across the land to range from 28%i n the case of the rather-unloved A319, to 40%+ for the A330-200 and -300, to 60%+ for the near-rabid A340 which no airline in its right mind wants to add to its fleet today, and up to 67-70% for the long-term loss-leader, the calamitous A380. Even the A350, which cannot yet be considered a viable program, has been offered sight-unseen at a 67.5% discount on list, so desperate is Airbus to pretend that it is actually in the game. Quantity rather than quality, the perennial French fascination.
 
The value of Airbus’ 1H09 production, therefore, is conservatively estimated at $25.3bn, against Boeing's $28.3bn, despite the former delivering nine more aircraft than Boeing.
 
Mortgaging the future, Toulouse-style. Amazing what you can get away with when your government won’t let you fail.

Analyses are solely the work of the authors and have not been edited or endorsed by GLG.