Airbus’s revised prognosis for this year is that the aerospace sector will face more uncertainty, with no prospect of full recovery until between 2023 and 2025. Reporting predictably depressed full-year results for 2020 on Thursday, the European group issued conservative projections for 2021, with aircraft delivery rates expected to be largely unchanged.
Issuing cautious financial guidance, Airbus CEO Guillaume Faury warned that the industry still faces multiple uncertainties. He stressed that even the anticipated medium-term recovery hinges on, “the evolution of the pandemic, but also the reactions and decisions of governments on [travel] restrictions and restoring freedom,” adding that, “we have to remain humble and resilient to protect our competitive position.”
Last year, consolidated revenues across the group’s civil, defense, space, and security businesses were down by 29 percent at €49.9 billion ($60.2 billion). Adjusted earnings, at €1.7 billion, were barely a quarter of those recorded in 2019.
Despite its airline customers facing unprecedented disruption to demand for flights, Airbus delivered 566 new aircraft in 2020 (down from 863 the previous year) and its best hope is that something close to this figure will be achieved this year.
Allowing for 115 cancellations, the airframer logged 268 new airliner orders (compared with 768 in 2019). Airbus’s commercial backlog stands at 7,184 aircraft and due to multiple factors, including a weaker U.S. dollar, the value of these is around 10 percent less than pre-Covid levels.
The shockwaves felt in the commercial aviation market were somewhat absorbed by better performance in its defense and space business, where the order book grew by 39 percent year-on-year to €11.9 billion. A contract signed in November to provide 38 new Eurofighters for Germany’s air force made a big contribution to this boost. Nine A400M military transport aircraft were delivered last year, including the first to Belgium.
Airbus Helicopters also felt less direct fall-out from Covid, with revenues growing by around 4 percent and adjusted earnings up by almost 12 percent at €471 million. Sustained government and military business helped these results, as did reduced costs, even though total rotorcraft deliveries fell by almost 10 percent to 300 units.
In reaction to a 66 percent decline in revenue passenger kilometers at the low point of 2020 for airlines, Airbus reduced civil aircraft production rates by around 40 percent and embarked on a concerted cost-cutting effort that has seen significant, but gradually-implemented, workforce cuts that will continue this year.
“We took the right decisions early in the crisis, but many uncertainties remain,” Faury told reporters. He said that the guidance issued for this year is based on the assumption that Covid will bring no worse disruption than can be envisaged right now, implying that this is by no means a given in view of the unwelcome arrival of new variants of the virus.
That said, Faury pointed out that the air transport market is showing stronger and earlier signs of recovery in some parts of the world, but certainly not in Europe where quarantines and tough restrictions on movement make it very hard for passengers to plan trips. “We will be delivering aircraft based on agreement with [airline] customers, monitoring their situations on a case-by-case basis,” he said.
Airbus’s management team will also step up efforts to make its manufacturing infrastructure and processes more cost-efficient and sustainable. Faury talked of the potential for “simplification” of the group’s “complex industrial system” but repeatedly played down suggestions that this might mean moving production away from its relatively high-cost European factories to regions such as Asia. Specifically, he gave an assurance that Airbus’s UK factories at Filton and Broughton will continue to be part of the production network, having celebrated the fact that the UK and the European Union were able to reach a trade agreement in late 2020 that avoided damage that would have resulted from a so-called no-deal Brexit.
Plans to open a dedicated final assembly line in Toulouse for Airbus’s A321 narrowbody flagship remain suspended due to the Covid-led downturn. Faury indicated that this plan will be reactivated when the market has “better visibility.”
Faury and his team see the Covid fog clearing only very gradually but with a higher degree of visibility than in the first few months of the crisis last year. “In the short-term, the situation looks like it is getting worse, and in the medium- to long-term, it is getting better and so the outlook for the end of 2021 and into 2022 should be slightly better,” he concluded. “This contradiction is difficult to manage and that’s why we are cautious with our guidance, but there is more production [capacity] in our planning, we just don’t know when the tipping point comes and so we do have a difficult balance between the short and long terms.”
On a brighter note, Faury expressed optimism that the long-running transatlantic dispute between the European Union and the U.S. can be resolved in a way that ends the damaging tariffs being endured both by Airbus and its rival Boeing. Asked about prospects for improvement under the new U.S. administration of President Joe Biden, he smiled cautiously and responded: “We really believe this [the current tariffs] is a lose-lose, especially in the pandemic. We believe the situation is now in place for a ceasefire and this should and most likely will happen.”