Airbus Group’s profit more than halved in 2016 as the aerospace company booked a €2.2 billion charge for its troubled A400M military transport aircraft.
The group’s defence and space division may only account for 18% of Airbus revenues, but it was largely responsible for a slump in net income from €2.7 billion in 2015 to €1 billion last year.
Operating profit from Airbus’ core business – commercial aircraft – rose slightly on the back of lower R&D expenses as the company transitioned from development to production of several aircraft programmes.
Nonetheless, it wasn’t plain sailing: Boeing delivered 60 more aircraft than Airbus through 2016, and the latter company took a €385 million charge for “loss-making contracts” on the A350.
Airbus delivered 49 A350s and 68 A320neos last year, despite supply chain challenges for both aircraft.
These have focused on interior manufacturer Zodiac for the A350 and engine manufacturer Pratt & Whitney for the A320neo, though other companies may also face difficulties.
“Whilst toilets and business class seats were the supply chain back markers, many other suppliers fought hard to keep just out of the limelight through the production ramp up,” says Paul Adams, head of aerospace at supply chain strategy firm Vendigital.
This year that ramp-up will focus on the A320neo, with Airbus reportedly calling for a “huge effort” from Pratt & Whitney to match PW1100G production with the airframes rolling off the line in Toulouse.
Another interesting takeaway from the results is that for all the talk about airframers moving into the aftermarket, services only accounted for 5% of Airbus commercial aircraft sales in 2016, as opposed 47% and 31% in it helicopter and defence divisions, respectively.
Perhaps, then, commercial aircraft services are a riper target for investment than Airbus’ troubled military arm.