Airbus burns through $12b in cash as Q1 core profit plunges 49% on coronavirus crisis

Airbus also reported a negative cashflow of 8.03 billion euros, including a previously published record fine of 3.6 billion euros. PHOTO: REUTERS

PARIS (BLOOMBERG) - Planemaker Airbus consumed an unprecedented 8 billion euros (S$12.3 billion) of cash in the first quarter as chief executive officer Guillaume Faury warned of the "gravest crisis the aerospace industry has ever known."

Some 3.6 billion euros of the cash hit came from a payment to settle a bribery case, eating up reserves while the planemaker grapples with the coronavirus outbreak, it said in a statement on Wednesday (April 29).

First-quarter adjusted earnings before interest and tax fell 49 per cent to 281 million euros and the company swung to a net loss. Faury said the company is still assessing the implications of Covid-19 and can't yet provide a financial outlook for the full year.

Airbus is battling to adapt to collapsing demand as the pandemic wipes out new aircraft sales and threatens existing orders as airlines run short of money. Faury said the company is aiming to survive without state support but that its customers and supplier base need as much help as they can get.

"The crisis is really unprecedented," he said on a call. "It's hitting all regions of the globe and all industries at the same time so the role of governments is obviously key. One of the major risks for us is suppliers going bust."

Airbus customer British Airways said Tuesday it will cut as many as 12,000 jobs, or close to 30 per cent of the total, to help survive a downturn in travel that could last for years, while Deutsche Lufthansa is locked in talks with the German government over a multibillion-euro bailout and could seek court protection if it can't reach a deal.

Boeing, Airbus's arch rival, is due to report earnings later on Wednesday. Both companies have suffered a 60 per cent share-price decline this year, though Boeing has also been roiled by the long-term grounding of is 737 Max model.

Faury said measures taken by Airbus so far, which include cutting annual production by slightly over one-third and temporarily laying off more than 6,000 workers, may be just the start, and the company will review the situation in June when there may be more visibility into the direction the crisis is headed.

Airbus is looking to furlough staff in Germany, and will put more French workers on leave.

The resizing of the company will be made not only looking at the minus 35 per cent adaptation we've done recently but also the likely scenario moving forward," Faury said.

Agency Partners analyst Sash Tusa said the cash outflow was worse than the 6.3 billion euros he'd predicted and leaves Airbus with just 3.6 billion euros in net cash.

The France-based manufacturer said it has reduced anticipated capital spending this year by about 700 million euros to ease demands on its sources. The company had already extended credit lines and clamped down on expenses to give it access to 30 billion euros.

While Airbus delivered 122 aircraft in the first quarter, the full impact of the coronavirus wasn't initially felt, Faury said, though 60 planes couldn't be handed over because of the outbreak. Deliveries in the second quarter "will be very low," he said. The company plans to ship about 600 jets during the year, down from a record 863 in 2019, though the tally may be slashed further.

Suppliers will feel a squeeze in the second quarter when cash payments drop, and will then need support, the CEO said, especially since many are already under pressure after the idling of the Max reduced revenue from Boeing.

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