Tuesday, December 15, 2015

Airbus Close to Selecting Buyer for Defense Electronics Businesses: CEO Tom Enders says divestment process ‘is in full swing’

The Wall Street Journal
Updated Dec. 15, 2015 7:08 a.m. ET

PARIS—Airbus Group SE expects to choose the likely buyer for its defense electronics businesses this year, Chief Executive Tom Enders said on Tuesday, as the plane maker implements a key part of its restructuring efforts.

The defense electronics unit is the biggest chunk of a series of divestments Airbus is planning as it refocuses its military activities. The entire divestment process “is in full swing,” Mr. Enders told reporters in Paris.

The company has received six bids and could narrow the field to one or two before moving to quickly complete a contract, Airbus’s head of strategy Marwan Lahoud said. The field has already been narrowed from about a dozen companies that submitted preliminary offers.

Airbus is increasingly focused on its aerospace business, particularly the commercial airplane activities that deliver most of the Toulouse, France-based company’s profits.

Commercial airplane order bookings this year are “well above what we estimated,” Mr. Enders said. Airbus has booked more than 1,000 commercial jetliner orders in the first 11 months of the year.

Airbus is poised to book more plane orders than rival Boeing this year, though the U.S. plane maker will deliver more planes. Mr. Enders played down the importance of the annual competition for bragging rights.

Amid concern that low oil prices could soften demand for new planes because gas-guzzlers are financially more sustainable for airlines, Mr. Enders said there are no signs that appetite for new jets is fading. Order cancellations remain low, and many are triggered by companies shifting to more fuel-efficient planes, he said.

This weeks’ global climate accord in Paris should also help cement demand for newer aircraft, Mr. Enders said, even though airlines aren't covered by the deal.

Low oil prices could also bolster demand for four-engine planes, including the company’s A380 superjumbo. Sales of that plane have been “disappointing” in 2015, he said, while holding out the possibility a first new order could still be signed before year end.

The company this year is meeting its target of delivering the first A380 planes that no longer lose money, he added.

Airbus considered starting work on an upgraded version, dubbed the A380neo, earlier this year, but it held off on moving forward as it continued to study the business case. Mr. Enders said the assessment of possible buyers and the business case would continue next year. “We are still positive on the A380neo,” he said.

Low oil prices aren’t all positive for the European plane maker, though. Mr. Enders said helicopter deals, already down in 2014, are slumping further this year. That is impacting revenue and profit at the business, he said.

Companies in the oil and gas businesses are among the biggest buyers of commercial helicopters. Those companies’ efforts to reduce capital expenditures have hurt demand for civil rotorcraft globally.

For 2016, Mr. Enders said much of the focus will be on building more planes as output on key programs, such as the A350 long-range jetliners rise. The company next year also should deliver at least 20 A400M military transport planes, where production has repeatedly fallen behind plans.

Airbus, like Boeing, has at times had problems meeting delivery commitments because suppliers aren’t delivering items on time. Cabin equipment has been a particular headache for both plane makers.

Mr. Enders said the situation could cause Airbus to ship only 14 of its new A350 long-range jets this year, rather than 15 as planned. If the one plane can’t be handed over as planned, it would be delivered early next year, he said.

Original article can be found here:   http://www.wsj.com

No comments: