Airbus boosts Q4 cash flow but remains cautious for 2021

A late flurry of jet deliveries helps the plane maker to beat its Q4 target despite a 35% drop in earnings

An Airbus A350 takes off at the plane maker's headquarters in Colomiers near Toulouse, France. Airbus generated €4.9 billion ($5.9bn) in cash during the fourth quarter, while issuing cautious guidanceShow more

Airbus generated €4.9 billion ($5.9bn) in cash during the fourth quarter, while issuing cautious guidance on the pace of its recovery from aviation’s worst-ever crisis.

The European plane maker rode a late flurry of jet deliveries to beat its target and break even for a second straight quarter, on the basis of adjusted free cash flow. Yet jet handovers are forecast to stay at 2020’s depressed levels this year, even as Airbus plans to ramp up production in the second half of the year.

“It is hard to reconcile the full-year 2021 guidance with what we saw in the third quarter of 2020 and what we think unfolded in the fourth quarter,” Jefferies analyst Sandy Morris wrote in a note. “We remain cautious about the pace at which the airline industry can rebuild its balance sheet to the point where aircraft demand rises significantly.”

The uncertain outlook confirms Airbus has yet to break free from the Covid-19 crisis that’s pummelled manufacturers and airlines alike for the past year. Air travel remains challenging, with countries tightening borders despite vaccine roll outs. Since January, when the European plane maker slowed a plan to increase output, customers have pared back flight schedules and dragged out aircraft deliveries further.

The Toulouse, France-based company reported earnings before interest and taxes of €1.83bn for the fourth quarter, a 35 per cent drop, as revenue slid 19 per cent to €19.8bn.

Airbus expects jet handovers this year to match the 566 delivered in 2020, it said on Thursday in a statement. The goal for adjusted free cash flow – which excludes the impact of M&A and customer financing – is breakeven, while earnings before interest and taxes is forecast at €2bn.

“Many uncertainties remain for our industry in 2021 as the pandemic continues to impact lives, economies and societies,” chief executive Guillaume Faury said in the statement.

Airbus said last month that output of its top-selling A320-series narrow-body will rise gradually to 45 per month through the fourth quarter. It had previously targeted a faster jump, to 47 monthly by July from the current rate of 40 planes.

Mr Faury said in January that he doesn’t expect the commercial aircaft market to return to pre-Covid levels until 2023-2025.

The value of Airbus’s order backlog fell by €98bn to €373bn at year-end, reflecting in part the longer-term damage wrought by the coronavirus pandemic on the health of the aerospace industry.

While case counts are coming down, new virus strains have created uncertainty about the timing of a global travel recovery. Passenger traffic may improve by only 13 per cent in 2021 in a worst-case scenario, the International Air Transport Association said this month. That compares with an official forecast of a 50 per cent rebound issued in December.