EUR 850.00 For Business Accounts Only

Morningstar | Airbus Is Ramping Up the A350 and A320 and Shutting Down the A380

Airbus designs, develops, and manufactures commercial and military aircraft, as well as space launch vehicles and satellites. The company operates across three business units: commercial aircraft, helicopters, and defense and space. The commercial aircraft business accounts for roughly 75% of revenue, and we expect this percentage to increase over the coming years.Airbus is a story of transformation, which is evident through its changes. Before 2007, there were two co-CEOs, which was a suboptimal structure, and the French and German states played a large role in decision-making at the company. One year after taking the helm in 2012, CEO Tom Enders jettisoned the company’s majority government shareholding structure. In addition, he rebranded the company Airbus, replacing the cumbersome European Aeronautic Defence and Space Co. moniker. Simultaneously, Airbus reorganized around three divisions and cleaned up its portfolio. Enders and the board also established a dividend policy. More recently, Airbus took a majority stake in the C Series (rebranding it the A220), paying nothing but it will provide procurement, sales, and marketing expertise, as well as another assembly location at its Alabama facility. Assuming Airbus can industrialize the program, the A220 increases our fair value by about 10%.In late 2017, Airbus announced that Enders won't seek another term as CEO and he plans to step down in April 2019. Other executives are also leaving the company. Guillaume Faury, who previously headed up the helicopter business at Airbus, will take over as the next CEO. Lower R&D demands, a more favorable EUR/USD rate, and the A350 and A320neo ramp-up will provide a EUR 3 billion operating profit tailwind from now until to 2022. We forecast operating profit will stand at EUR 7.9 billion in 2020 compared with EUR 5.8 billion in 2018. Operating cash flow will follow suit, and customer advances combined with Airbus' ability to extract payables out of its supply chain will help defray some of the inventory build associated with increasing commercial aircraft deliveries. We forecast more than 1,000 commercial aircraft deliveries in 2022, up from 800 deliveries in 2018.